Serial Mergers

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

Merging with another organization has downfalls of destroying wealth from the merger. Considering the buying price is important when merging, spending too much on the merger will impound the value after the merger. Some mergers do not create wealth so capital is lost through the merger. There is no guarantee of financial gain and every formula considered with focus, just as with an acquisition. The final decision dictated by the variables. One company merging with another company takes the debt and losses of those companies in the new formed company.

Companies do not have the freedom to merge and acquire as they please do. All have to meet the requirements and essentially be approved by regulatory bodies. In the context of regulations, antitrust laws and security laws are commonly referred to by regulator to determine whether a merger or acquisition should be allowed or rejected. Antitrust laws prohibit mergers and acquisitions that impede competition. The point is very simple where antitrust is referred to as competition. The goal is to increase competition because more competition in economics means that consumers get more at a fairer or lower price. Anytime a regulator believes that a merger or acquisition will make an industry or market less competitive, the business transaction might

According to Wheelen and Hunger an acquisition is a growth strategy that occurs when a company absorbs another (usually smaller) company as an operating subsidiary or division of the acquiring corporation. Acquisitions usually take place with companies of different sizes and they can be hostile or friendly. Acquisitions can also be a good way to grow

Becoming a larger more efficient company with a strengthening competitive position opens up the opportunity for more mergers and acquisitions of competitors, suppliers and/or customers.

Each of the approaches for expansion – IPO, Acquisition, or Merger – also has weaknesses. An IPO can be expensive and may require 15-25% of the money raised to cover the costs of raising capital in this way. An IPO also requires a tremendous amount of reporting to meet the requirements of the SEC, both for the initial offering and for the future publicly traded company, which not only requires the time and effort of staff members but may also give valuable information to the company’s competitors. All this reporting then creates legal liability for errors and omissions in the prospectus, which adds a further layer of complication. In the end, the former owners lose some control over the business and must share future wealth with the new shareholders. Mergers

The goals of mergers range from reducing the number of competitors, to access of new products (Belcourt et al., p 330). Statistics show that 80% of new product developments fail (Howells, 2011), partly due to challenges and conflicts with human resources functions. Mergers and acquisitions are the fastest way to enter new markets. “It is estimated that 1/3 of all mergers fail due to faulty integration of diverse operations and cultures,” (Chhinzer, 2013). Therefore, the success of a merger or acquisition lies in the ability to guide, motivate, retain, and effectively use

Haspeslagh and Jemison (1987), argue that what determines the success of a acquisition is not the actual purchase itself, but the development of the acquisition strategy the supports. Unfortunately, many executives face the acquisitions as an end, not a means to achieve that end. According to this author, the acquisition is only one strategy business growth. There are others as internal growth, joint venture, partnership, franchise and strategic alliance. All should be evaluated by the company before implementing a business development strategy. A proper analysis of the acquisition goes beyond the study's own candidate company. It must include a contribution from the analysis of potential acquisition for the strategic development, as well as

My feelings mirror those of a text I studied while in college that holds deep value for me and the way I feel about the company’s position moving forward. The text is that of Jim Collins entitled Good to Great . In it, the author explains that while in a transition period, a company should not make irrational acquisitions that do not align with the core of our business model. It describes how this action may lead to many unseen side effects, such as confusion in the market place, lack of employee support, an exodus of leadership that do not believe in the move and an overall negative growth of business.

Although there is a high degree of attention on the financial calculations in these strategic decisions, Cartwright & Cooper (1992) show that 50 percent of all acquisitions fail financially. The reason for this is usually that the human factor plays a larger role than what is recognized during the decision process. According to Buono & Bowditch (1989) most of the problems that affect the result occur internally by the dynamics in the new organization. The human factor is therefore an element that should not be ignored during those strategic changes. A merger is not something that happens to an organization, it happens to the people within the

In regards to acquisitions, it is important to distinguish between mergers and acquisitions. In a merger, two companies come together and create a new entity. In an acquisition, one company buys another one and manages it consistent with the acquirer’s needs. An acquisition that involves integration has greater staffing implications than one that involves separation (Rizvi, 2008). A combining of companies is a major change. Mergers and acquisitions represent the end of the gamut of options companies have in combining with each other. It is the mergers and acquisitions that are the combinations that have the greatest implications for size of investment, control, integration requirements, pains of separation, and people management issues

(Sloman/Sutcliffe, 1998 p. 50). However, apart from the benefits that may be gained from the acquisitions, they may also have some negative impacts on the companies and their stakeholders, a perfect example would be the Wal-Marts takeover of ASDA. According to (Levine, J. 2004) “Wal-Mart spent wisely when it acquired ASDA for $11 billion “, as this cross-border acquisition presented the company with the new growth opportunities. Considering that Wal-Mart’s revenues are mainly generated through the sales and provision of services, in order for the company to achieve its growth targets , the potential market of its subsidiary must provide suitable economic and market conditions with sufficient levels of demand . Through the acquisition Wal-Mart has gained existing segment of ASDA’S market and also the unlimited access to the relatively rich UK’s market with 55,000,000 potential customers, which has enabled the company to increase its market share so increasing its profitability and sustaining its growth. Also, the acquisition has opened the company new opportunities for its further expansion, in period of five years after the takeover the company has opened additional 30 stores and 19 depots. (OU case study

natural route to success, but has tended to be a quick and easy way of

There is an urgent need for them to get used to the new working system and colleague relationships. So acquisition might lead to partially inefficient management through changes of power and status in company position (Sudarsanam, 2003). Moreover, acquisition extends the scope of management and therefore makes it more complex and more difficult to handle. Competing interest, incompatible goals, disagreement regarding resource allocation and opportunistic behavior may all lead to inter- firm conflicts (Das and Teng, 2000). These diversifications of the combined firm would also create problems of managing a wider range of resources and competencies on an overall aspect. Inter-firm conflicts reduce the participants’ incentive and willingness to cooperate as a whole team, providing fewer chances for the firm to realize its goals (Das and Teng, 2000). In order to keep the firm’s original consistency of operation and achieve efficient and continuous development while dealing with unexpected diversification caused by acquisition, managers might have to spend a large amount of money and all kinds of resources on management. This huge cost would conceivably have negative effect on the growth of acquirer and even lead to a collapse of the combined firm.

A merger takes place when two companies joint together to form a single company. A merger is alike to a takeover or acquisition, except that in the case of a merger remaining stakeholders of both companies involved retain a shared interest in the new company. 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. Acquisition refers to buying out another company and taking it into the fold of the acquiring company. This is done by paying the acquired company, the value of its capital and depending upon the situations, a premium over the capital amount. Acquisitions and mergers both involve one or multiple companies purchasing all or part of another company. The main difference between a merger and an acquisition is how they are financed. By acquiring a small company with a good technology, a big company can develop a competitive advantage for example; recently Facebook acquired Instagram and Whatsapp. This means to stay competitive; company needs to remain on top of technological development and buyer will need to pay an amount if they want to acquire the company and for seller, that premium represents their company 's future growth. Merger or acquired its increases the capital of small company.