Do Mergers and Acquisitions always bring desired results?
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Student Name: Mandeep Kaur (10211855)
Module Leader: Simeon Scott
Course: MA- IBM
Introduction: For my research topic I have chosen this topic to analyse and to investigate about the mergers and acquisitions of organisations. Do these mergers and acquisitions always bring desired results or not. Mergers and acquisitions are very common and occur everywhere i.e. in organizations, administrative units and businesses in all industries and of all sizes specially in banking sector and in pharmaceutical firms. At this time of globalisation competition is increasing very rapidly and To face the challenges and explore the opportunities, firms are going for inorganic growth through various strategic alternatives like mergers and acquisitions, strategic alliances, joint ventures etc (kumar and bansal, 2008) . Mergers and acquisitions help the firm to get the valuable capabilities possessed by the acquired organizations to develop them internally in a shorter time (Karim and Mitchell, 2000). Besides having huge benefits, most of mergers and acquisitions still face many challenges. Still mergers and acquisitions fail to accomplish many strategic objectives. According to a survey, the results of mergers and acquisitions are: • From all of them, only 23 per cent of all acquisitions earn their cost of capital. • In acquired companies, 47 per cent of executives leave within the first year, and 75 per cent leave within the first three years. • In the first four to eight months that follow a deal, productivity may be reduced by up to 50 per cent. • Cultural issues are the top factors in failed integrations (Galpin and Herndon, 2000:2).
Objectives of research:
1. Why mergers and acquisitions arise?
2. Motives or aims of mergers and acquisitions.
3. Possible reasons of successful mergers and acquisitions. 4. Possible reasons of failure or problems in mergers and acquisitions. 5. Positive impacts of mergers and acquisitions on performance of organisations 6. Negative impacts of mergers and acquisitions on overall performance. 7. Strategy for successful mergers and acquisitions.
For this evaluation I will consider the available primary, secondary and tertiary sources.
Overview of topic:
Difference between Mergers and acquisitions:
According to Samuels, Wilkes and Brayshaw, “the term mergers and takeovers (acquisitions) are often used interchangeably. This is because in many instances it is not clear whether one or the other is occurring.” Mergers: The combination of one or more corporations or other business entities into a single business entity; the joining of two or more companies to achieve a common motive. Mergers are usually friendly, that is a merger is usually acceptable to all concerned parties (coulter M, 2002). Acquisition: acquisition on the other hand is an outright purchase of an organisation by another. Acquisitions usually are between organizations of unequal sizes. Acquisition can be a friendly or hostile. Combination between two parties due to their mutual consent is called friendly acquisition and a hostile acquisition, called a takeover, the organization being taken over doesn’t want to be acquired (coulter M, 2002). Whether a purchase is perceived as a friendly or hostile depends on how it is communicated to and received by the target company's board of directors, employees and shareholders (Harwood, 2006). Mergers can be of different types:
Horizontol merger is a merger between the organisations or purchasing business in the same field of endeavour in order to obtain a more profitable firm for its know how, patents and processes and to increase market shares or to buy up surplus capacity. On the other hand vertical merger is...
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