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. Acquisition Premium

    The difference between the estimated real value of a company ...
  5. Merger

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

    A company which is the subject of a merger or acquisition attempt. ...
Related Articles
  1. Mergers & Acquisitions: An Avenue For ...
    Forex Education

    Mergers & Acquisitions: An Avenue For ...

  2. What Are Economies Of Scale?
    Economics

    What Are Economies Of Scale?

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. What Merger And Acquisition Firms Do
    Investing Basics

    What Merger And Acquisition Firms Do

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center