Indicated by the exact meaning of the word, the term merger and acquisition(M&A) describes two different circumstances. A merger is the unification of two or more firms into a new one, while an acquisition is one company’s purchase of the majority of the shares from another (Bressmer 1989, Pausenberger 1990, Brauchlin 1990). A M&A is thus characterized by the fact that after unification there are fewer firms than before. After an acquisition, however, the target firm can either remain autonomous, or be partially or wholly integrated into the new parent company, although the firms remain independent entities from a legal point of view. Results showed that approximately half of all mergers or less are successful, but the question surrounding the causes of failure still remains. The evidence indicates that doesn’t seem to be a single matter to why some mergers fail or why others succeed. One reason of failure may be the problem of communication through the company which may create an unfriendly working environment. In the presence of a high risk of losing their jobs,it is a difficult task to keep people motivated in doing their best at their working places.(Bulent 2005; Buono & Bowditch 2003). Another reason for failure, according to Buono & Bowditch (2003) is that managers should not underestimate the people issues that might arise and neither the cultural aspects. As stated in Hayward (2002), acquiring companies could be following an incorrect strategy: choosing the wrong target, paying too much for it and then integrating it poorly (Gilson and Black 1995;Haspeslagh and Jemison 1991). According to Cartwright and Cooper (1993), “financial and strategic considerations dominate the selection of a suitable acquisition target or merger partner. Decisions are driven by issues of availability, price, potential economies of scale, and projected earning ratios. Consequently when the combination fails to realize financial expectations, the post-mortem analysis of merger failure or underperformance tends to focus on reexamination of the factors that prompted the initial selection decision. Typically, poor selection decisions are attributed to an over inflated purchase price, managerial incompetence in achieving projected economies of scale, or that the organizations are strategically mismatched.” Analyzing in terms of investment, if a private investor puts money into a company he has an expectation of both risk and return on the investment. Given a particular level of risk, the investment needs to be expected to have a particular level of return. For example, investment in a start-up needs to have the potential for a very high return, given the higher risk of failure, while investment in a large established business can be coupled with a lower expected return, given the lower risk of failure.
The next problem is poor morale. Morale is the job satisfaction, outlook, and feelings of an employee. Right now, employees do not feel secure within the business and are rebelling against it. They do not have a positive outlook for the future of the business and feel betrayed because of all of the people getting let go. The employees right now have a poor morale due to all these factors.
fail (Cheng, 2012). Mergers and acquisitions are much common in these days and only a few of them are end up in successes. Even though mergers and acquisitions are not result much successes rate, many organizations are still preferring it because, it is used as a cooperative strategy but nowadays it is used for cooperative development. The cultural differences and merger integration can be considered as an important factor for the failure rate but this study mainly focused
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Brenda, I must start by saying I am not in total agreement with the notion that mergers and acquisitions are fast and efficient ways to get into new markets. Casing point the current case of wellcome, no one could prove to me in any way that this merger was anything close to efficient. I would, however, agree that it can be a faster way to get into a new market and consolidate resources. Per (Hussinger, 2010), technology acquisitions can strengthen the firms’ technological competencies, on the one hand. A bundling of competencies can be important in order to stay competitive in fast-growing markets. Effective communication in my view can be one of the key ingredients to having a successful merger. It
Negative Results. The negative outcomes of consolidation are often seen in the financial and public relations aspect of consolidating. One of the most prominent and controversial as...
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
Mergers and Acquisitions ultimately represent change within an organization. No other event in business can be as stressful or difficult as a merger or acquisition. The term “Merger” describes two organizations merging into one company and the term acquisition refers to the acquisition of assets by one company from another company. Mergers can also be driven by basic business reasons, such as bargain purchase. It may be more cost effective to acquire another company then to invest internally.
Being the lack of career development programmes the main reason for employees to leave the company more in detail issues were identified:
As the business, people put it, to maximize the wealth of shareholders (Peavler, 2016). This could be done by pursuing more of an immediate reason that will realize the shareholders wealth maximization goal. However, this main reason may fail to be realized as most mergers depict negative results.
When two companies decide to combine forces and become one bigger, richer mega company, it is called merging. This process forms a new company, combining the money and ideas of what used to be two different entities into one. This, however, is not the only thing that results from merging two different companies, and since we will be discussing the merging of two companies in the pharmaceutical industry, the impact will be incredible. Of course, the merging of two companies will not only have positive impacts but it will have many negative side effects as well. Furthermore, depending on the size of the merging companies and the goals of the people leading these companies there will always be contradictions according to the long-term goals or short-term goals depending on what both parties’ interests are. Our company, Verduga Inc. is contemplating to merge with Coronado-Salinas Inc., so before we rush into such a merger we must contemplate the positive and negative aspects of such a move. When it comes to mergers there are always many possible positive and negative impacts due to the effects of merging; these effects more widely impact the fields on research and development, on employment and management, stocks and shareholders, monopolization, and ingenuity.
This is the business valuation stage. In this stage, the acquiring party should assess the situation of the their firm and its future capabilities. Will the company be able to maintain its market share, the return on capital or there core competencies? If not, then a merger and acquisition would be necessary.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
It is very clear that the problems experienced in the companies are not lone standing but in most of the cases they are dependent on each other and there are strong bonds or relationships with regards to the cause and effects between them. It is therefore important to form or establish a strong cause and affect between them.
organizations tend not to have the right components and working atmosphere in place that allows
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.