Why do Companies Continue with Mergers and Acquisitions when so many Fail?

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Recommended: Advantages and disadvantages of mergers and acquisitions

Why do Companies Continue with Mergers and Acquisitions when so many Fail?

The phenomenon of mergers and acquisitions (M&A’s) triggers an array

of opinions and viewpoints. Often it is a strategy that is seen as a

perfect way of achieving growth. It is by no means an organic or

natural route to success, but has tended to be a quick and easy way of

increasing an organisations size and power. However although there have

been ‘waves’ of popularity and success since its introduction in the

1960’s it has also suffered criticism due to the number of failures it

has accounted for. Despite the strong suggestion that this strategy

has been the architect for many an organisation's downfall there still

remains a propensity in the current business environment for managers

to adopt it. Throughout this essay I am going to examine some of the

areas that explain M&A’s volatility and attempt to discover why

managers are persevering with the strategy when it is seemingly

flawed.

Over the last few decades it has become increasing apparent that the

effect of mergers and acquisitions is not as beneficial as once

thought. When the growth strategy was pioneered in the middle part of

the nineteen hundreds it was looked upon as a way of creating an

empire across different sectors and countries. Many experienced

managers were sucked into the strategy, only having eyes for the

apparent synergistical and positive affects of M&A’s. Although over

the following years there has been many success stories concerning

M&A’s, when the big picture is examined it displays a more ugly side

of the phenomenon. Hodge (1998) discovered that ‘in the go-go ‘80s,

37% of mergers outperformed the average shareholder return in that

period; in the fi...

... middle of paper ...

...nal, Autumn; Customer text-section 2, topic 11.

- Kieran et al (1994) ‘Planning the deals that generate value and gain

advantage’, Mergers and Acquisitions, March-April; Custom text, topic

12.

Journals

- Doitte S & Smith G (1998). ‘The morning after (avoiding mistakes in

acquisitions and mergers)’. Winter v63 i2 p32(8).

- Davenport, T (1998). ‘The Integration Challenge (managing corporate

mergers’ Management Review.

- Heitner M (1998). ‘The thorny business of merging rival firms’,

Mergers and Acquisitions.

- Hodge, K (1998), ‘The art of the post deal (outcomes of mergers)’.

Management Review.

- Price, A & Sloane, J (1998). ‘Global Designs: Tough Challenges for

- Acquirers’. Mergers and Acquisitions..

- Whipple J & Frankel R (2000), ‘Strategic Alliance Success Factors’.

The Journal of Supply Chain Management.

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