The overview of mergers and acquisitions and literature review
The topic of mergers and acquisitions has been increasingly investigated in the literature in the last two decades (Appelbaum et al., 2007) in response to the rise in M&A activities as well as the increasing complexity of such transactions themselves(Gaughan, 2002). With the purpose of setting an M&A context for the thesis topic, we will explore M&A activities in terms of its definition and classification, motivations, post-merger integration.
1.1 The connotation of mergers and acquisitions.
Mergers and acquisitions , in the broad sense, may imply a number of different transactions ranging from the purchase and sales of undertakings, concentration between undertakings, alliances, cooperation and joint ventures to the formation of companies, corporate succession/ ensuring the independence of business, management buy-out and buy-in, change of legal form, initial public offerings and even restructuring(Picot, 2002, p.15). However, Nakamura(2005) explains that using a broad definition of M&A could lead to confusion and misunderstanding as it entails everything from pure mergers to strategic alliance. Therefore, this thesis adopts the definition of M&A in a narrower sense as clarified below.
-Mergers is the combination of two or more companies in creation of a new entity or formation of a holding company.(European Central Bank,2000, Gaughan,2002, Jagersma,2005)
-Acquisition is the purchase of shares or assets on another company to achieve a managerial influence (European Central Bank, 2000, Chunlai Chen and Findlay, 2003) not necessarily by mutual agreement (Jagersma 2005).
1.2 The classification of M&A
In the view of M&A transactions from the perspective of the value ch...
... middle of paper ...
... to have M&A.
1.5.4 Enter markets quickly
The reason why enterprises have transnational M&A is that they can enter host countries’ markets quickly and have time efficiency. Enterprises can not only acquire local resources prior but also get the profit of market structure efficiency.
1.5.5 Management-motivated M&A
Enterprises will take over other enterprises that have low managerial effectiveness when their managerial capacities exceed need. In this way, acquirers can take full advantage of surplus resources to achieve management synergy and improve enterprises’ value.
Under the market economy conditions, there are many external factors that motivate enterprises have M&A such as changes of industrial structure, changes of business circle and government’s administration intervention. The most fundamental motivation for M&A is the pursuit of profit maximization.
Cost cutting, discontinuation of product or services ,technological changes, and consolidation due to mergers and acquisitions are commonly legal ac...
Consultation and analysis of previous similar cases is important in handling a large merge of the magnitude presented here. From the way the new management of American Airline is handling the case, it is evident that that they must have consulted extensively and studied previous mergers. This is a major case study for mergers.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
The September Duke University/CFO Business Outlook survey indicates that three-quarters of the CFOs surveyed expect M&A activity to slow. Of particular interest is the suddenness of this change in expectations. In the prior quarter’s survey, the majority of surveyed CFOs expected M&A to “stay strong through the remainder of 2007.”
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
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:
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.
Zejan, M. (1990). New ventures or acquisitions: The choice of Swedish multinational enterprise. Journal of Industrial economics, 38(3), 349-355.
Firms exist with the purpose of create and deliver economic value (Bensaco et al 2010, p. 365); therefore, business that create better economic value than its competitors will attain an advantage position in market place. Companies might try to improve its sales (profit) through domestic expansion, product diversification or by internationalisation; this report will focus on the reasons of espressamente Illy to expand internationally; additionally, its sources of competitive advantage and, the analysis of three markets in which company want to participate.
Companies merge and acquire other companies for a lot of strategic reasons with different degree of success. The success of a merger is measured by whether the value of the acquiring firm is enhanced by it. The impact of mergers and acquisitions on organization can be small and big in other cases.
According to Florida Incorporation, a merger is the statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. An acquisition is obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets (Florida Incorporation, 2006).
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.
Chaurasiya, K. and Profile, V. 2010. Advantages and disadvantages of acquisition | business management strategy. [online] Available at: http://businessofaccouting.blogspot.co.uk/2010/04/advantages-and-disadvantages-of.html [Accessed: 8 Mar 2014].
Firstly, multinational corporations are not something new in this 21st century. There are more and more international corporation as people try to boost the process of globalization. The development of these multinational corporations depends on the management of the owners. Transnational strategy is needed in order to operate such a big system of companies. Every nation in this system has to be managed thoroughly in order to help running the corporation, as well as to keep the system as one consistent body of business. Managers also find it important to look for opportunitie...
The first two do not require the acquired business unit to be connected with the existing units; the second two depend on connection. Although the concepts are not always mutually exclusive, the way in which they generate value for the corporation is different for each. The portfolio management balances current business activities with new industry acquisitions. Its success is undervalued acquisition meets attractiveness and COE test. The challenges are: increased capital market competition, need for industry specific knowledge, and growth of the company and diversity. The restructuring seeks underdeveloped or sick companies and industries. Its successes are: utilize and pass the three tests and ability to find undervalued companies with growth potential. Its challenges are: restructurer exposed to more risk, time limit for success, hold onto a restructured company, and growing depletion of restructuring pool with increased competition. The transfer of skills involves activities important to competitive advantage. With transferring skills, business activities are similar enough that sharing knowledge would be meaningful. However, skills must be useful to key business activities and must be beyond competitors’ capabilities. The ability to share activities has been a potent basis for corporate strategy because sharing often enhances