Managing Mergers and Acquisitions
Introduction
Mergers and acquisitions are becoming commonly practiced strategic options for organizations. Organizations are coming together one way or another to realize emerging commercial opportunities. Goals for this upcoming and popular strategy converges around themes including growth, diversification and achieving economies of scale.
A merger is a consolidation of two organizations into one. On the other hand, acquisition is the purchase of an organization by another which gives the buyer or acquirer the power of control over the organization.
The prime reason for mergers and acquisitions are to maintain or increase market share and to increase share holder value by cutting cost and initiating new, expanded and improved services.
However, in many cases, the opposite is happening. For example, the Daimler-Chrysler merger; although both the firms were performing quite well, the merger of the two organizations did not seem to meet the expectations of benefiting from the merge. Months following the merger, the stock price of Chrysler fell by roughly one half and the firm was beginning to lose money and was expected to continue losing money for the coming few years. To make things worse, there were significant layoffs in Chrysler following the merger of the two firms.
Merger or acquisition success correlates directly with the level and quality of the planning involved. Organizations tend to spend insufficient time in analyzing and anticipating current and future market trends as well as integration issues.
Even though the predominant mergers and acquisitions are carefully designed to ensure a strategic fit between the two organizations, the task of integrating still remains difficult. Research shows that the opportunity for mergers to fail is the greatest during the integration process.
Good management plays a very important role contributing to the success of mergers or acquisitions. This paper attempts to look into issues pertaining management of
Mergers and acquisitions are becoming commonly practiced strategic options for organizations. Organizations are coming together one way or another to realize emerging commercial opportunities. Goals for this upcoming and popular strategy converges around themes including growth, diversification and achieving economies of scale.
A merger is a consolidation of two organizations into one. On the other hand, acquisition is the purchase of an organization by another which gives the buyer or acquirer the power of control over the organization.
The prime reason for mergers and acquisitions are to maintain or increase market share and to increase share holder value by cutting cost and initiating new, expanded and improved services.
However, in many cases, the opposite is happening. For example, the Daimler-Chrysler merger; although both the firms were performing quite well, the merger of the two organizations did not seem to meet the expectations of benefiting from the merge. Months following the merger, the stock price of Chrysler fell by roughly one half and the firm was beginning to lose money and was expected to continue losing money for the coming few years. To make things worse, there were significant layoffs in Chrysler following the merger of the two firms.
Merger or acquisition success correlates directly with the level and quality of the planning involved. Organizations tend to spend insufficient time in analyzing and anticipating current and future market trends as well as integration issues.
Even though the predominant mergers and acquisitions are carefully designed to ensure a strategic fit between the two organizations, the task of integrating still remains difficult. Research shows that the opportunity for mergers to fail is the greatest during the integration process.
Good management plays a very important role contributing to the success of mergers or acquisitions. This paper attempts to look into issues pertaining management of