General And Administrative Leverage

AAA

DEFINITION of 'General And Administrative Leverage'

A variable within a cost benefit analysis of an acquisition where the potential reduction in overall general and administrative expenses of the combined company are considered. Through synergies and cost-saving programs, the general and administrative costs of the combined company often will be considerably less than the sum of the general and administrative costs of the two independent companies. The more the potential savings, the more attractive the acquisition becomes, when all else is equal.

INVESTOPEDIA EXPLAINS 'General And Administrative Leverage'

When valuing an acquisition it is essential that a company accurately value the benefit of a target company's general and administrative leverage. One of the reasons, a company would want to acquire another company is the economies of scale that can be achieved. Subsequently, if the cost savings that have been identified from general and administrative leverage are overestimated, the acquiring company may be worse off after the acquisition. But it is important to note that this is only one aspect of the overall analysis of a potential acquisition.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  3. Acquisition Fee

    A fee charged by a lessor to cover the expenses incurred in arranging ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
  6. Acquisition Premium

    The difference between the estimated real value of a company ...
Related Articles
  1. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  2. Economics

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  3. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  4. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.
  5. Investing

    Facebook's Most Important Acquisitions

    Strategic acquisitions have been key to Facebook's growth and success, and the company has acquired more than 50 companies or properties since it's formation in 2004.
  6. Investing Basics

    Poison Pill

    A poison pill is a corporate maneuver put in place to try and prevent a hostile takeover. The target corporation uses this strategy to make its stock less attractive to the acquirer. This is ...
  7. Stock Analysis

    Breaking Down the Halliburton Baker Hughes Deal

    Halliburton is using a downturn to get bigger and stronger in the long term, and the company is getting Baker Hughes at a reasonable price as a result.
  8. Brokers

    Key Differences Between M&A Advisors And Business Brokers

    For a buy, sale or partnership for one's business, one needs brokers and advisors to proceed ahead. Here are the key differences between business brokers and M&A advisors.
  9. Trading Strategies

    Selecting Mergers & Acquisitions Advisories For Small Businesses

    Mergers and acquisitions advisories aren't just for big players. Many advisory firms cater to small and medium businesses.
  10. Investing

    M&A Advisory Business Boutiques: How The Small Shops Are Capturing Large M&A Deals

    M&A advisory boutiques are becoming a big business, giving large investment banks a run for their money.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center