Managing Conflict Mergers and acquisitions are frequent in today’s business environment. In fact, most leading organizations have at some point acquired competitors. For instance, Walt Disney purchased Pixar for $7.4 billion in 2006 (Monica, 2006). In the beginning, Disney and Pixar worked together prior to the merger in 2006 on many projects such as Toy Story, in 1991. This was Pixar’s first feature film and was co-produced with Disney.
Merger and acquisition are term used to define the consolidation of companies. When two companies are combined to form a single unit, it is known as merger, whereas acquisition refers to the purchase of company by another one, which means that no new company is formed, but one company has been absorbed into another. Mergers and Acquisitions are important component of strategic management, which comes under corporate finance. The subject deals with buying, selling, dividing and combining various companies. It is a type of restructuring, with the aim to grow rapidly, increase profitability and capture a greater proportion of a market share.
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.
CHAPTER 2 LITERATURE REVIEW 2.1 Corporate Identity Theory Corporate identity theory proponents argue that there is need for consistency in identity (Leitch and Motion, 1999), to both internal and external public. Therefore the need to establish reliability and it is by maintaining the identity. At the same time we have witnessed institutions rebrand in order to reach out to their customers/ public in the most effective way. This is based on may be changes in the scope of market, leadership, products or services being provided. Good examples in Kenya include, National Bank of Kenya, Kenya Power, Kenya Television Network (KTN), K24, Nation Fm- from Easy Fm which previously was Nation Fm, British American Insurance to Britam etc.
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.
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
Cisco used acquisitions to access new technologies and scarce intellectual assets. Cisco’s acquisitions were successful provided they achieved three primary goals, employee retention, return on investment and new product development. The acquired company was integrated into Cisco’s manufacturing systems and processes. The acquired company had to go through ISO audit following the integration. Cisco would plan the integration of the acquired company’s employees into the integration process and offer them good incentives.
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.
One of the key goals of business strategy is growth. There are many ways in which a company can grow, but one of the most effective and rapid methods is through mergers and acquisitions (M&A). M&A is a general term used to refer to the consolidation of companies. The term M&A typically includes any business combination in which a company obtains capital in the form of equity and/or debt, or in which the company, or a portion of the company, is acquired. Specifically, an acquisition is the buying of one business entity by another, and a merger is when companies combine to form a new company.