The important reasons for merging is to cover the space in the company’s product, resources, extending market area and economies of scale, which the new combined entity will have when operated individually before. Economies of vertical integration helps to access significant control over the production process. Also through the new management, Operating profits can be raised by reducing wastages and redundancies from operations. Synergies are also an important reason for merging as the positive synergy could reduce the cost and drive up the revenues. In the merged firm, abundant skills and technology being pooled together and brings innovation in products and services.
Essentially, a business will attempt to merge with another business that has complementary strengths and weaknesses. Diversification / Sharpening Business Focus: These two conflicting goals have been used to describe thousands of M&A transactions. A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industry's performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of operations. Growth: Mergers can give the acquiring company an opportunity to grow market share without having to really earn it by doing the work themselves - instead, they buy a competitor's business for a price.
There a few reasons for merger and acquisition which are it can increase the market power, get control of entry barriers, and increase level of diversification. The first reason is merger and acquisition are very popular among companies is because it can increase the market power. Market power is the company's ability to increase market prices for goods and services offered from existing prices. The profitability of a company depends on the market power which are generally implemented by a firms which are highly competitive. For example, Nestle SA strengthen its market position by increasing the market price for one of their products which is their baby-food line.
Mergers and acquisitions (M&As) have been for decades a popular strategy for organizations to grow globally. The goals are to produce economies of scale (Shelton, Hall, & Darling, 2003), increase profitability and market share (Cartwright & Cooper, 1993a), and to achieve synergy (Cartwright & Cooper, 1993b; Shelton et al., 2003). It is an effective way of achieving rapid corporate growth, penetrating into new markets, and gaining a number of other strategic and competitive advantages. Moreover, cross-border mergers and acquisitions are a large component of global foreign direct investment (FDI) activities according to the United Nations Conference on Trade and Development. Indeed, Global FDI activity was at its peak at US $1.7 trillion during
Specifically, an acquisition is the buying of one business entity by another, and a merger is when companies combine to form a new company. M&A also refers to the department of a financial institution that sets up and brokers such deals. A true merger is quite rare. The most famous example of
This type of mergers raises three basic competitive problems. The first problem is the competition between the merging companies is eliminated. The unification of the operations of merging companies might create substantial market power and might enable the merged entity to raise prices by reducing output unilaterally is the second problem raises by horizontal mergers. The last problem is the transaction might strengthen the ability of the remaining market participants to coordinate their pricing and output decisions if the concentration in the relevant market is
A number of studies abound in the literature which identify the following factors posing challenges to the merger process: - the improper integration of culture, management of the change process, the technological and business intelligent requirement, the regulatory and compliance requirements, as well as the human element. Yet, there is the realization that little or no attention is given to the human element or the human side of change which is the real key to maximizing the value of a merger (Gunther, 2001; Kay & Shelton, 2000; Schuler & Jackson, 2001; Schuler, Tarique & Jackson, 2004). By virtue of this realization, though mergers and acquisitions are seen by many as a relatively fast and efficient way to expand into new markets, incorporate new technologies and to innovate, their success is by no means assured, with majority of them falling short of their stated goals and objectives (Schuler & Jackson,
Acquisition in business is related to how a company obtains technologies needed for its businesses. The acquisition can be achieved internally through R&D process or externally through external collaboration such as purchasing, outsourcing, licensing, alliances and M&A. in this essay, I will be discussing the different types of acquisitions adopted by google for its technology acquisition and development and the strengths and weaknesses of such strategy. I will also discuss how innovation is linked to acquisition. At the end of the essay, I will go through the keys to success in planning for external collaboration and are the reasons that can make such collaboration fails.
The positive impact of the vertical agreement on the market. 2. The negative impact of the vertical agreement on the market. The subject matter of such agreements relate to tie-in-agreements, exclusive supply agreements, refusal to deal with the third party, exclusive distribution agreements etc. The validity of such agreements are analysed in accordance with sec 3(4) read with sec 3(1) of the Competition Act,2002.
Over the past decades, mergers and acquisitions (M&As) have become increasingly common as a means for organizations to grow fast and offer an alternative to internal, organic growth (Teerikangas & Very, 2006). Nonetheless, although M&As provide unique opportunities for expansion, their success rates are relatively low and many do not meet expectations. Since financial and strategic aspects fall short in explaining these mediocre outcomes (King et al., 2004), researchers have shown a growing interest on the human factors during post-merger integration (Cartwright & McCarthy, 2005). Indeed, employees’ perceptions of the operation are important in the integration phase (Zaheer et al., 2003), and academics frequently refer to organizational culture