Failures of Mergers and Joint Ventures
Failures of mergers and joint ventures
In recent years, the number of mergers and joint ventures has gone up. The fact is that many companies want to expand their business in order to get advantages such as increase in revenue, a cut in cost in general. However, the main reason for the integration of organisations is due to a competitive world that they must face. Unfortunately, the side effect is that many mergers and joint ventures often break up, and it is claimed that 40% of mergers and joint ventures fail. Therefore, this essay will examine the main reasons for the breakdown of mergers and joint ventures. We shall also focus on culture, communication, leadership and globalisation, which have major effects on the failure or success of mergers.
To start with, a merger occurs when two companies combine to form a single company. A merger is very similar to an acquisition or take-over, except that in the case of a merger existing stockholders of both companies involved retain of a share interest in the new corporation. By contrast, in an acquisition one company purchases a bulk of a second company's stock, creating an uneven balance of ownership in the new combined company (wisecGeek what is a merger).
In many cases, a firm will merge with another in order to benefit from what the other company has. Examples are mobile companies Sony and Ericsson which has both merge together to form Sony Ericsson. This integration has made them one of the leading mobile company's WorldWide.
On the other hand, a joint venture is define as a new business entity formed by two or more firms and is usually referred as parents'. Joint ventures are commonly created when one parent searches another in order to provide needed resources or capabilities to exploit potential synergies, or share risks. Joint ventures can be established for a definite time spent to fulfil particular objectives (Barajas and Kozolchyk). Joint venture is very common and is found in most sector of the
In recent years, the number of mergers and joint ventures has gone up. The fact is that many companies want to expand their business in order to get advantages such as increase in revenue, a cut in cost in general. However, the main reason for the integration of organisations is due to a competitive world that they must face. Unfortunately, the side effect is that many mergers and joint ventures often break up, and it is claimed that 40% of mergers and joint ventures fail. Therefore, this essay will examine the main reasons for the breakdown of mergers and joint ventures. We shall also focus on culture, communication, leadership and globalisation, which have major effects on the failure or success of mergers.
To start with, a merger occurs when two companies combine to form a single company. A merger is very similar to an acquisition or take-over, except that in the case of a merger existing stockholders of both companies involved retain of a share interest in the new corporation. By contrast, in an acquisition one company purchases a bulk of a second company's stock, creating an uneven balance of ownership in the new combined company (wisecGeek what is a merger).
In many cases, a firm will merge with another in order to benefit from what the other company has. Examples are mobile companies Sony and Ericsson which has both merge together to form Sony Ericsson. This integration has made them one of the leading mobile company's WorldWide.
On the other hand, a joint venture is define as a new business entity formed by two or more firms and is usually referred as parents'. Joint ventures are commonly created when one parent searches another in order to provide needed resources or capabilities to exploit potential synergies, or share risks. Joint ventures can be established for a definite time spent to fulfil particular objectives (Barajas and Kozolchyk). Joint venture is very common and is found in most sector of the
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