Best Practices of Mergers and Acquisitions

Topics: Mergers and acquisitions, Merger integration Pages: 9 (3233 words) Published: July 25, 2009

Mergers and Acquisitions: Best Practices for Success


Mergers and acquisitions have become a growing trend for companies to inorganically grow a business within its particular industry. There are many goals that companies may be looking to achieve by doing this, but the main reason is to guarantee long-term and profitable growth for their business. Companies have to keep up with a rapidly increasing global market and increased competition. With the struggle for competitive advantage becoming stronger and stronger, it is almost essential to achieve these mergers. Through research I will attempt to dissect the best practices for achieving merger success.

Mergers and Acquisitions: Best Practices for Success
When companies are acquired or merged, people almost immediately start to focus on the differences in the companies. They also begin to pay attention to who are the winners and who are the losers. It is typical in an acquisition for the acquiring company to see itself as the winner, and the acquired company as the loser. The controlling company wants to impose changes and view those in the acquired company as highly resistant to change. It is clear that most mergers and acquisitions are primarily based on strategic, financial, or other objectives. However, ignoring a potential mismatch of people and cultures can lead to strategic and financial failure. In most mergers, serious consideration should be given to cultural and leadership style differences. The success of a merger or acquisition can be defined as the creation of synergy. But every merger and acquisition is a unique event, occurring in a unique environment that is subject to various influences. Analyzing a merger should begin by understanding the culture and core values of the business that is being acquired. Ashkenas, DeMonaco, and Francis (1998) observed that “. . . it is increasingly important that executives learn how to manage the integration of acquisitions as a replicable process and not as a one time only event” (p.166). DiGeorgio (2002) has researched this topic extensively through the mergers and acquisitions of Cisco and GE Capital. Cisco approaches mergers by “. . . (a) doing [its] homework to select the right companies and (b) applying an effective reliable integration process once the deal is struck”(DiGeorgio, 2002, p.138). Cisco has in the past turned down deals with companies which did not fit within its strategy. Cisco looks at deals from the following perspective (DiGeorgio, 2002): 1.Are our visions basically the same?

2.Can we produce quick wins for shareholders?
3.Can we produce long-term wins for all four constituencies – shareholders, customers, employees, and partners? 4.Is the chemistry right?
5.For large M&A, is there geographic proximity? (p.138)
GE Capital, on the other hand takes a more process-based approach to handling mergers. Since GE has performed plenty of mergers and it learns and grows from each one. The crux of its process is “[g]etting the right integration leader [which] constitutes 95 per cent of the success of an integration” (DiGeorgio, 2003, p.139). This study highlights the importance of being proactive in pre-merger planning and offers advice to help ensure that the merger process will be a success. Within this paper, I plan to discuss the best practices companies can use to ensure a successful merger. These practices include timely merger planning, choosing the right leadership, focusing on corporate culture, communicating effectively, and engaging the staff, human resources, and middle management. Timely Merger Planning

There is a lot of time and effort spent on finding good merger candidates and courting them only to fall through on the follow-up integration activities. As soon as serious discussions begin with a potential merger candidate, the integration planning efforts should begin. It is essential that acquisitions...

References: Ashkenas, R., DeMonaco, L., & Francis, S. (1998). Making the
Deal Real: How GE Capital Integrates Acquisitions
Badrtalei, J., & Bates, D. (2007). Effect of Organizational
Cultures on Mergers and Acquisitions: The Case of Daimler Chrysler
Brahma, S., & Srivastava, K. (2007). Communication,
Executive Retention, and Employee Stress as Predictors of Acquisition Performance: An Empirical Evidence
Brahy, S. (2006). Six solution pillars for successful
cultural integration of international M&As
DiGeorgio, R. (2002). Making mergers and acquisitions work:
What we know and don 't know -- Part I
DiGeorgio, R. (2003). Making mergers and acquisitions
work: What we know and don 't know--Part II
LaMarsh, J. (2006). What mergers miss. Journal of
Corporate Accounting & Finance (Wiley), 17(2), 59-62.
Messmer, M. (2006). Leadership Strategies During
Mergers and Acquisitions
Pekala, N. (2001). Merger They Wrote: Avoiding a Corporate
Culture Collision
Stopper, W. (1999, July). Mergers and Acquisitions: Fulfilling
the Promise
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