JP Morgan Corporation: Effectiveness and Efficiency of Mergers and Acquisitions

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The Effectiveness and Efficiency of Mergers and Acquisitions by the Example of JP Morgan Corporation

Julia Kravchuk
3rd year student of International Relations Department
KROK University

Submitted in partial fulfillment of the requirements of the Business English course Lecturer: Tetyana Karpova
June 2011

Mergers and acquisitions are considered to be quite effective methods for a company’s growth, its development and, what is more, decrease in the number of competitors by taking them over. As a result, many economists all over the world try to analyze and explain possible outcomes of different integrations. Their opinions and given definitions can be freely found in the Internet. However, this theory should be proven by some specific examples. Therefore, the aim of the paper was to find out whether the merger between JP Morgan Chase & Co and Bank One Corporation was worth doing or not. The results of the research, which were clearly described by various graphs, showed that the integration between the two financial giants had positive influence on the companies’ performance and further functioning.

In the modern world of growing economy and globalization, companies on both domestic and international markets struggle to achieve the optimum market share possible and, thus, increase their profits. Nowadays, the most popular way to do this is mergers and acquisitions, which allows to create huge corporations and to beat the competitors. However, there are some negative as well as positive consequences of such method. That is why each particular situation should be analyzed in details. In order to understand clearly all the aspects of integrations and their types, specialized literature and experts’ opinions are available, mostly in the World Wide Web. Furthermore, the theoretical part should be supported by a practical side of the question. That is why this research paper represents an example of a merger between two financial corporations in the US. The main purpose of the study was to see whether this integration was successful or not and whether it was a good idea for JP Morgan to merge with Bank One Corp.

Literature Review
To define the topic more clearly, let us state that the corporate merger, as defined by Quick MBA reference site, is “…the combination of assets and liabilities of two firms to form a single business entity”, and acquisition or takeover is when the company buys the other one (MacKenzie, 2006). In other words, it is the process of absorption. However, there is a difference between these two terms. Merger tend to be used when the combination is portrayed to be between equals, while during acquisition the target company ceases to exist, since the buyer swallows the business. According to The Free Encyclopedia Wikipedia actual mergers of equals don't happen very often. Usually one company will buy another and, as part of the deal's terms, allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. This move can lessen emergence of negative consequences after signing the papers, such as problems with employees and top managers of companies that participated in this “merger”. Beechmond Crest Tutorials site (2011) distinguishes three main parts of mergers, which are: horizontal, vertical and conglomerate. Horizontal integration is a merger between two competitors, who operate in the same sphere of business. Vertical can be divided into two additional sectors: backward integration – merger with supplier; and forward integration – merger with reseller. A conglomerate merger is a union of two companies that are not competitors and not part of the same supply chain. This paper contains the research on effectiveness of merger between two companies, working in financial sphere.

Findings. Discussion
In the year 2004 JP Morgan Chase & Co, New York, agreed to buy Bank One Corporation, Chicago, for about $58...
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