Mergers and Acquisitions

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Nowadays mergers and acquisitions are regarded as a key strategic option for the organisations all over the world. According to Huang and Kleiner (2004) mergers and acquisitions have become the principal means by which companies have the opportunity to grow revenues due to factors such as gloabalisation, rapid technological changes, a long-term bull market and strategic barriers to growth. Porter and Singh (2010) admit that mergers and acquisitions play an important role in reallocation of resources in an economy. Despite the huge increase of corporate mergers and acquisitions during the last decades many surveys show that the majority of them fail (Nguyen and Kleiner 2003).The purpose of this essay is to give a brief overview of mergers and acquisitions by providing the main key drivers behind this trend, the basic reasons why they fail and some recommendations for better results at the future.

Firstly it must be mentioned that despite the fact that mergers and acquisitions are regarded as the same process, they are not exactly the same. Shcraeder and Self (2003) argue that mergers are the consolidation of two organisations into one; while acquisitions are the purchase of one organization from another where the acquirer maintains control. Porter and Singh (2010) state that synergy, agency and hubris are the main motives of mergers and acquisitions. Seth et al (2000) argue that the synergy motive suggests that the object of the acquisition is to create a firm greater than the sum of the value of the individual firms. Both the managers of target and acquirer firms act in the best interest of their respective shareholders, with the basic principle to maximize their wealth via economic gains. The agency motive proposes that the mana...

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...akeovers in Australia?”, International Journal of Business and Economics, vol. 9(2), pp.87-103.

Ragozzino, R. and Reuer, J. J. (2010). “The opportunities and challenges of the entrepreneurial acquisitions”, European Management Review, vol. 7, pp. 80-90.

Roll, R. (1986). “The Hubris Hypothesis of Corporate Takeovers”, Journal of Business, vol.59, pp. 197-216.

Schraeder, M. and Self, R. D. (2003). “Enhancing the success of mergers and acquisitions: an organizational cultural perspective”, Management Decision, vol. 41(5), pp. 511-522.

Seth, A., Song, K. and Pettit, R. (2000). “Synergy, Managerialism or Hubris? An Empirical Examination of Motives for Foreign Acquisitions of U.S. Firms”, Journal of International Business Studies, vol. 31(3), pp. 387-405.

Stallworthy, E. A. and Kharbanda, O. P. (1988). TAKEOVERS, ACQUISITIONS AND MERGERS. London: Kogan Page Limited.

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