Causes And Consequences Of Mergers And Acquisitions Management Essay

Introduction

The intent of this research is to transport out an probe into causes and effects of the Amalgamations and acquisitions ( M & A ; As ) activities which are taking topographic point in the modern-day universe of concern and direction. It is the most favorite pick of the organisations over the last two decennaries for the enlargement and growing of concern ( Lodorfos and Boateng, 2006 ) . Harmonizing to Huyghebaert, ( 2010 ) in 2007 entirely a entire trades of 35982 worldwide accounted for an sum of US $ 1345 billion. Many houses in the large market economic systems like USA and China etc usage amalgamations and acquisitions as corporate/business scheme to accomplish different sorts of aims. The causes and primary aims of amalgamations and acquisitions may dwell of capital allotment, incursion into new markets in assorted geographic parts every bit good as to derive experience and cognition in proficient and direction field etc in order to better overall public presentation of the house. Amalgamations and acquisitions are normally utilised by corporations strategically in order to last and to turn and to maximise the concern and its profitableness. The primary aim of unifying or geting new concern is usually to better overall public presentation through synergism accomplishments which is chiefly described as “ 2+2=5 ” consequence that increases the competitory advantage of both the concerns ( Cartwright and Cooper, 1993a ; Hovers, 1971 ; Porter, 1985 ; Weber, 1996, cited in Appelbaum et Al, 2000 ) . But merely the being of this synergism construct is non a promise that it will be realized in the hereafter because many surveies in the literature has indicated that these acquisitions have negatively affected the economic public presentation of new entities. Although in footings of fiscal and legal facets these acquisitions are usually planned carefully but due to hapless human resource direction and strategic be aftering the concluding consequences sing the station acquisition public presentation remain normally dissatisfactory and about 50 per centum of these acquisitions are regarded as failed in literature. Harmonizing to Ravenscraft and Scherer, ( 1989, cited in Lodorfos and Boateng, 2006 ) over two-third of the large acquisition trades fail to increase profitableness and to make value for stockholders.

There's a specialist from your university waiting to help you with that essay.
Tell us what you need to have done now!


order now

In order to accomplish sustained competitory advantage and to accomplish the benefits of a successful acquisition it is indispensable that the whole procedure throughout the amalgamation be implemented as strategically, lawfully and financially from a sound point of view and besides from behavioral attack.

Outline of Research

This survey attempts to measure, analyze and categorise old research work, every bit good as to detect the determiners of a successful amalgamation, causes of failure, its effects on corporations and employees. The cardinal issues such as function of communicating throughout the amalgamation procedure, function of corporate civilization and its effects on workers, staff preparation etc will besides be examined in the predating chapter. After the debut the following subdivision is followed by literature reappraisal which begins with old research work. Then there is a treatment of the cardinal factors involved in the pre-merger, during-merger and post-merger activity procedure. The causes and aims of M & A ; As every bit good as the jobs in whole procedure are discussed in the predating portion of the survey. At the terminal a decision is drawn upon the analysis of the informations collected from different books, articles and web sites, and by interviews/questionnaires and referenced in Harvard manner of referencing.

Literature Review

Harmonizing to Montgomery ( 1994 ) there are three types of theories sing house ‘s acquisition/diversification viz. market power position, resource based position and bureau theory which explains why companies diversify. Market power position provinces three motivations of variegation such as the usage of net incomes in a peculiar market to back up predatory monetary values in another market, confederation or collusion with other houses which compete this house in assorted markets at the same time and the concluding 1 that the house may desire to go on mutual purchasing with large houses to get the better of little rivals. The resource bases theory suggests that the house may diversify due to its extra capablenesss and resources which can be utilised in other industries to accomplish economic systems of range. While bureau theory says that directors try for variegation for their personal involvements at the stockholder ‘s disbursal, because of their expected addition in compensation, power and occupation security etc.

The research literature indicates that throughout the M & A ; As procedure the most of import function is played by the communicating variable. “ When the intelligence about a amalgamation and acquisition appears, emotions range from fright and confusion to credence and exhilarations ” ( Messmer, 2006, cited in Appelbaum, 2007 ) . Communication is regarded as a cardinal factor to successful integrating of two conflicting civilizations. It plays a critical function in fixing the employees mentally and psychologically to follow the new civilization, the alteration procedure every bit good as it reduces the uncertainness which is the cardinal challenge to turn to. There are different sorts of communicating such as pictures, electronic mails, postings, memos and the most of import one is the face to confront contact. Harmonizing to Vecchio and Appelbaum, ( 1995 ) communicating creates understanding through assorted symbols, verbal and gestural marks etc. Richardson and Denton ( 1996 ) emphasizes executives to understand the positive relationship between communicating and media effectivity. Furthermore they states that media is richest beginning of communicating in footings of its ability to react rapidly and to manage multiple undertakings of information at the same time. Traveling from electronic mails or memos ( Thin Forms ) to pictures and face to face contacts ( Richer Forms ) is really described as traveling from thin to richer signifiers. Harmonizing to Lengle and Daft ( 1988, cited in Appelbaum et Al, 2000 ) merely the everyday information should be communicated through thin signifiers but the non-routine messages should ever be sent through richer signifiers of media. It is besides of import that a good timed communicating program should be developed during the pre-merger phase before finalising the acquisition trade. But in some instances the direction deliberately make holds in communicating due to the fright of employee ‘s absenteeism and low productiveness. The accomplishment of communicating in its existent sense is non easy due to some obstructions such as the increased centralisation and deficiency of top-down communicating between direction and employees. This phenomenon is termed as “ Merger Syndrome ” which was foremost utilised by Mraks and Mirvis ( 1997 ) . Lack of organisational communicating causes distrust, employee absenteeism and decreased productiveness which decidedly leads to an unsuccessful acquisition. In during-merger and in post-merger stages direction should guarantee to maintain the workers good informed in good clip through updated newssheets, memos, bulletins or magazines etc. The effectivity of communicating can be increased through the guidelines as identified by Davy et Al. ( 1989 ) in which he states that the communicating programme should be good and seasonably planned every bit comprehensive as possible and should go on throughout the integrating procedure, and it should incorporate the principle for organisational alterations every bit good as it should be perceived believable by employees.

Research workers have besides focused on the function of corporate civilization and how the communicating affects the civilization in integrating procedure. Fralicx and Bolster ( 1997 ) province that “ civilization can be a brand or interrupt factor in the amalgamation equation ” Harmonizing to Cartwright and Cooper ( 1993 ) incompatible civilizations result in un-realisation of fiscal advantages anticipated from ( M & A ; As ) procedure. Webber, ( 1996 ) suggests that cultural differences can negatively impact the successful amalgamation and overall public presentation of the house. Most of the research workers are agreed that cultural tantrum entirely is non the warrant to a successful amalgamation but it is perfectly true that cultural differences create tenseness and it negatively affect the managerial every bit good as fiscal public presentation of the entity ( Broke et al, 2000 cited in Lodorfos and Boateng, 2006 ) . Buckley and Casson ( 1996 ) , and Parkhe ( 1991 ) reinforced this by stating that these differences can do obstructions to information flow, cognition transportation and can adversely impact houses ‘ endurance. Cultural similarities hence create sense of coherence ; convey the workers of unifying companies together which accordingly help in accomplishing synergism. Hofstede ( 1991, cited in Lodorfos and Boateng, 2006 ) defines civilization “ as the corporate scheduling of head which distinguishes the members of one group of people from another ” . Bing a cardinal component of amalgamation procedure its importance and its full strength can be seen particularly when two clashing civilizations are tried to acquire together. Combination of different civilizations is a cardinal challenge to turn to in the acquisition procedure as it most likely to impact the house ‘s result in footings of managerial and fiscal public presentation. This challenge is discussed in a figure of theories such as relation human ecology ( Jackson et al. , 1991 ) , individual administration tantrum ( O’Reilly et al. , 1991 ) , societal motions ( David, 1977 ) , proposing that why the employees of the acquired houses feel so much force per unit area in following the civilizations and direction patterns of the acquirers. These theories besides suggest that due to the direction underestimate of civilization tantrum, most of the acquisition trades end with unsuccessful consequences and regarded as fail ( Faulker et al, 2002 and Krishnan et Al, 2004 ) .

A figure of surveies have enlightened the function of human factor as a cardinal map in the success or failure of the amalgamation trades ( Covin et al. , 1997 ) . Harmonizing to Appelbaum, ( 2000a ) human factor is one of the most important beginnings for a house in footings of competitory advantage and if a house demand to derive such advantage it must be prepared to follow behavioral attack in M & A ; As procedure. While some research worker like Marks, ( 1997 ) argues that the failure of amalgamation trades is attributed to taking incorrect spouse, at incorrect clip, paying a incorrect monetary value or for a incorrect ground etc.

Methodology/Design/Approach of the Research

Methodology indicates the features of research, intent of research, range, methods of informations aggregation and analysis and research sample etc. Here the intent of the research is to analyze and look into the cardinal factors that influence the success in a amalgamation or acquisition trade.

Data Collection Method/Procedure/Sample features

Harmonizing to Saunders, ( 2003 ) under the “ deductive attack ” the writer develops a construct taken from a theory that is subjected to a strict trial. The writer develops hypothesis from a peculiar form of a house and so to prove this hypothesis he collects quantitative informations to guarantee the dependability and cogency of the trial. While under the “ inductive attack ” the research worker personally collect the primary informations by questioning the cardinal staff in order to better cognize about the existent state of affairs foremost and so on the footing of that information he explicate a theory. It is possible to take both the deductive or inductive attacks to this research, therefore both qualitative and quantitative research methods of informations aggregation to this survey may use. To measure the function of the cardinal issues such as communicating and corporate civilization that influence amalgamation ‘s success, qualitative attack is chosen due to its most suitableness to the nature of research. Table 1 shows the sample features. The sample of the survey is some 40 big fabrication companies engaged in Europe and USA in different Fieldss such as computing machine equipments, chemicals, and pharmaceutical and wellness attention merchandises etc. These companies are chosen because of their strong being in the market every bit good as involved in large amalgamation trades during the period of 1999-2004. The sample size indicates the figure of participants in the research and an ideal sample is that in which bulk of participants take portion but usually it does non go on due to deficiency of entree to respondents or their ineligibility to react. In order to roll up informations secondary beginnings such as market studies and market intelligence were used along with some study questionnaires with directors and employees of both the mark and acquirer companies. The questionnaires were sent by electronic mails and stations while the interviews were conducted on telephone.

Design of Questionnaire

All the inquiries generated for interviews and in the questionnaire were strictly based on the intent of the research, and were related to the literature reappraisal. The questionnaires were divided into three chief parts. The first portion of the questionnaire is about the background of the company in order to better understand about its size, merchandises and the grounds for its amalgamation with another company and the standard for this amalgamation. The 2nd portion is concerned with strategic considerations every bit good as with cardinal factors like communicating and cultural issues during M & A ; As assorted phases. Final portion of the questionnaire comprises of inquiries related to benefits the company have achieved through concentrating on the function of civilization tantrum, communicating and cultural integrating throughout the amalgamation procedure. The inquiries are simple and are designed in an interesting manner to promote the respondents to make full in all the undermentioned inquiries.

NO.

%

State of beginning

United kingdom

Sverige

16

10

40

25

Germany

08

20

Switzerland

04

10

USA

02

05

Employee turnover in $ bn

5 – 15

15 – 25

25 – 35

Over 35

Year of M & A ; A

40

12

04

02

02

1OO

25

20

10

10

1999

2000

06

04

30

20

2001

2002

04

02

20

10

2003

02

10

2004

02

10

Table 1 Sample Features

Pilot Study

To do certain whether the inquiries are simple, apprehensible and non as complex, the questionnaire should be piloted ab initio ( Richard and Anita, 1997 ) . In order to guarantee the cogency and dependability of the inquiries all these inquiries were tested against the similar research survey ‘s inquiries. In add-on questionnaire is consulted with adviser every bit good as discussed with some pupils in order to acquire advice and to better its efficiency.

Data Analysis and Interpretation

Lashkar-e-taibas assume that questionnaire are sent by electronic mail, stations and some questionnaires are completed through telephonic interviews and 50 per cent of the responses are back and all the informations in returned questionnaires can be used in analysis. To better understand the in-depth state of affairs, account constructing manners of analysis and content analysis were used and complexness among the variable was studied for each inquiry.

Consequences and Discussion

The consequences from the information collected shows that about all the houses interviewed are seeking to better their merchandise portfolio, cognition in scientific and proficient Fieldss, competencies every bit good as to turn and spread out concern assets and market portions through the M & A ; A activities. Therefore advantages of amalgamations extend beyond fiscal aims i.e. entree to new markets, accomplishing and edifice nucleus competencies, economic systems of graduated table and to prolong competitory advantages in long-run.

On the function communicating variable it is found that it plays a cardinal function in the success of amalgamation procedure. Successful acquisitions communicate early to staff, clients, and investors and to media.

The respondent at AmeriSourcBergen said that our integrating office develops our communicating programs and approves them to guarantee the consistence in the messages delivered to our employees, clients and investors, this program identifies of import messages, internal or external marks and the type of media we use.

The interviewing directors of both amalgamation companies at HP expressed that effectivity of communicating is capable to realistic appraisal of facts instead than being over optimistic peculiarly it is important to employees who are concerned about their occupations.

The corporate communicating director at GlaxoSmithKline notified that in some acquisition they undertook there was deficiency of equal treatment, information sharing with staff and brotherhoods which had a important impact on employee ‘s emphasis degree and behavior.

It is besides found that the human factor and civilization dramas critical function in the integrating procedure and in success of amalgamations. Novartis respondent pointed out that disregarding cultural facet can significantly hinder acquisition procedure. He added that cultural differences create unsure state of affairs for employees, directors and managers.

The acquisition director at Dow-Union Carbide emphasized that the cardinal challenge of integrating procedure is to incorporate clashing civilizations and this is non an easy undertaking. Similarly respondent of ICE said that it is important to increase the possible to a successful amalgamation by paying attending to cultural issues from the start of the integrating procedure.

Some respondents besides identified other cardinal factors which are important to amalgamation and acquisition procedure such as placing synergisms by unifying holistically in order to be stronger than the two organisations on their ain, to incorporate good and speedy and to fix an early elaborate planning, direct engagement of senior executives, functioning the demands of the clients during integratioln procedure and to develop the employees from the start of the integrating procedure for this intent so that they can reply any inquiry originating from client or investors in order to cut down the uncertainness.

Decision:

This survey has examined that the communicating and corporate civilization throughout the integrating procedure play an of import function. The handiness of up to day of the month information, consistence and realistic flow of messages to employees, clients and investors cut down uncertainness which in bend addition the productiveness and profitableness of the house during amalgamation procedure. This addition productiveness will better the overall public presentation of the house by accomplishing synergisms and prolonging competitory advantage. Almost all the interviewees pointed out that deficiency of communicating and incompatible civilizations are the chief causes of unsuccessful amalgamations. Lack of effectual communicating additions cultural mutual exclusivenesss and causes tenseness among the employees and directors. So the survey suggest that to cut down the communicating and cultural jobs the directors should non give information merely but besides try to affect all stakeholder in M & A ; A procedure and for this intent they should pay particular attending to pull a comprehensive strategic program and to implement it throughout the amalgamation procedure.

Ethical Issues/Limitations of Research

While transporting out the research there are some ethical issues as good which need to be observed by the research worker in order to protect the rights, confidentiality and regard and self-respect of participants. Harmonizing to Saunders, ( 2003 ) deriving entree might be hard for research worker due to the sensitiveness of the research subject, confidentiality concerns of the organisation etc. In add-on the person may non be prepared to go on or acquire involve in the research due to miss of clip etc.

There are besides some restrictions to this research such as in informations aggregation for illustration when research worker sends questionnaire by any beginning with a position to acquire every bit much responses as possible but usually it does non go on and most of organisations do non answer. Similarly research workers besides face trouble in turn uping right individual and in booking assignments with directors due to their non-availability.

Mentions

Appelbaum, S, H. LefronCois, F. Tonna, R and Shapiro, B, T ( 2007 ) . “ Amalgamations 101 ( portion one ) : preparation directors for communicating and leading challenges ” , Industrial and commercial preparation, 39 ( 3 ) , pp. 128-136.

Appelbaum, S, H. et Al ( 2000 ) . “ Anatomy of a amalgamation: behavior of organisational factors and procedures throughout the pre-during-post-stages ( portion 1 ) ” . Management determination 38 ( 9 ) , pp.649-661.

Buckley, P.J. and Casson, M. ( 1996 ) , “ An economic theoretical account of international joint venture scheme ” , Journal of International Business Studies, 22 ( 4 ) , pp. 579-601.

Cartwright, S. and Cooper, L.C. ( 1993 ) , “ The function of civilization compatibility in successful administrations ” , The Academy of Management Executive, Vol. 34, pp. 67-80.

Covin, T.J. , Kolenko, T.A. , Sightler, K.W. and Tudor, R.K. ( 1997 ) , ”Leadership manner and post-merger satisfaction ” , Journal of Management Development, 16 ( 1 ) , pp. 22-33.

Davy, J.A. , Kinicki, A. , Scheck, C. and Kilroy, J. ( 1989 ) , “ Acquisitions make employees worry: companies ease the hurting through effectual communicating ” , Personnel Administrator, pp. 84-90.

Faulker, D. , Pitkehly, R. and Child, J. ( 2002 ) , “ International amalgamations and acquisitions in the UK 1985-1994: a comparing of national HRM patterns ” , International Journal of Human Resource Management, 13, pp. 106-22.

Huyghebaert, N. , Luypaert, M, ( 2010 ) , “ Ancestors of growing through amalgamations and acquisitions: Empirical consequences from Belgium ” , Journal of Business Research, 63, pp. 392-403.

Lodorfos, G. and Boateng, A. ( 2006 ) . The function of civilization in the amalgamation and acquisition procedure: Evidence from the European chemical industry. Management Decision 44 ( 10 ) , pp. 1405-1421.

Marks, M. L, ( 1997 ) , “ Consulting in amalgamations and Acquisitions: Interventions spawned by recent tendencies ” , Journal of Organization Change Management, 10 ( 3 ) , pp. 267-279.

Marks, M.L. and Mirvis, P.H. ( 1997 ) , “ revisiting the amalgamation syndrome: crisis direction Part 2 ” , Mergers and Acquisitions, 32 ( 1 ) , pp. 34-40.

Montgomery, C.A. , ( 1994 ) . “ Corporate variegation ” . Journal of Economic Positions 8 ( 3 ) , 163- 178.

Parkhe, A. ( 1991 ) , “ Interfirm diverseness, organizational acquisition, and length of service in planetary strategic confederation confederations ” , Journal of International Business Studies, 27 ( 5 ) , pp. 849-75.

Richard, F and. ANITA, L. , ( 1997 ) . Research methods for building, BlackwellScience Ltd.

Saunders, M, Lewis, P. And Thornhill, A. , ( 2003 ) . Research Methods for BusinessStudents, 4th edition, Essex, Prentice Hall, pp. 162-173, 245-279, 406-407.

Vecchiuo, R.P. and Appelbaum, S.H. ( 1995 ) , Pull offing Organizational Behaviour: A Canadian Perspective, Harcourt Dryden Barce, Toronto, Canada.

Weber, Y. ( 1996 ) , “ Corporate cultural tantrum and public presentation in amalgamations and acquisitions ” , Human Relations, 49 ( 9 ) , pp. 1181-202.

No Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Free Essays
My Favorite Celebrity Essay

My favorite celebrity I’m writing my essay on is Maya Angelou. The reason why I’ve chosen her as my favorite celebrity is that she has given us the greatness of poems. Her poem’s to me is so remarkable. My favorite poem is “Still I Rise”. This poem is so influential …

Free Essays
To kill a mockingbird prejudice Essay

Imagine living in a world where people criticized, prejudiced and even assaulted someone just because of a certain physical feature of their body. They don’t get paid as much, its legal for others to beat them to or near the point of death (A widely publicized occasion) they would hear …

Free Essays
Increased Spending at Theme-Parks Essay

Increased Spending at Theme-Parks There’s a specialist from your university waiting to help you with that essay. Tell us what you need to have done now!order now In class, it has been discussed that to increase spending at theme parks, the strategy is to provide guests with better options. These …

x

Hi!
I'm Terry

Would you like to get such a paper? How about receiving a customized one?

Check it out