A merger happens when two companies decide to combine into one entity or when one company acquires another. One plus one makes three: this equation is the special outcome of a merger or an acquisition. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind merging. A merger can also happen when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Business Mergers can be either effective or an aggregate catastrophe. Because a merger cost a ton of cash doesn't imply that it will be an effective arrangement. A standout amongst the best mergers was the merger of Exxon Company and Mobil Partnership, the merger between two of oil organizations. This merger is considered today one a definitive business mergers ever as per numerous business sites.
The strategies that corporations use to increase their economic influence have become an expansive science. One of the most advantageous yet economically risky strategies would be that of corporate takeovers. This modern day tactic has many forms including mergers and acquisitions. Patrick A. Gaughan Ph.D. is a graduate level professor at Fairleigh Dickenson University and renowned expert in the field of business. He defines a merger as the following: “…two companies combine in a friendly deal that often features extensive negotiations between the managers of the two companies.” (((Gaughan, Patrick A., pg. 241))) A merger is simply two, usually struggling companies coming together with the common goal of pooling one another’s resources to increase
Over the last few years, the pressures emanating from international competition, financial innovation, economic growth and expansion, heightened political and economic integration, and technological change have all contributed to the increased pace of mergers and acquisitions.
In addition to the pro-competitive economic effect some firms also experience what is known as a post-merger which is basically an incentive for a firm to raise downstream competitor costs by raising upstream market costs. Hence the increased price pressures the previously established downstream prices which cause conflict.
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.
Mergers aren’t what I would call the most successful thing in the world either. Lots of mergers don’t last very long or don’t succeed. This past year we had quite a few merger failures. Here are the top 10 Biggest Merger and Acquisition Bloopers of 1999, announced by leading merger consultants.
In the world today, many mergers and acquisitions are happening as a result of financial losses, gaining an advantage on a competitor, increasing capabilities, and strengthening services by diversifying the products. There are numerous other reasons, but this paper will focus on the reasons indicated above.