Effect of mergers and acquisitions on performance of firms- case study of Lenovo and IBM PC
Background of the Study
As pointed out by Agrawal, Jaffe and Mandelker (1992), decisions on mergers and acquisitions are highly critical in the success of companies, as well as their managers. Numerous corporations always find that one of the best means of getting ahead is expanding the ownership boundaries via the mergers, as well as acquisitions. Mergers and acquisitions result into the creation of synergies, and besides, it enables the merging firms to gain various economies of scale besides expanding their operations and cutting on various costs. Investors might always expect the mergers to provide highly enhanced power for the market. A number of the advocates of the mergers are of the argument that mergers have the capacity to cut on their costs besides boosting the revenues that are gained by firms (Ismail, Abdou and Annis, 2010). According to Beitel and Schiereck (2001), mergers and acquisitions are corporate finance aspects, management aspects, as well as strategic management aspects that entails selling, buying, dividing, as well as combining diverse firms, as well as similar firms, which have the capacity to help an organization to grow rapidly within its location or sector, or within a newer field or within a newer location, without the creation of a subsidiary, or without the use of a joint venture. Generally, mergers and acquisitions activities may be referred to as a kind of restructuring given that they always result into the reorganization of various entities. They are mainly aimed at the provision of growth, as well as positive value (Tse and Soufani, 2001). As pointed out by Beitel, Schiereck and Wahrengoug (2002), a merger refers to the legal consolidation of two firms into a single entity. On the other hand, acquisition always takes place when a single firm takes over a different...