BUSINESS MERGERS

The Success and Failure of Business Mergers

The Success and Failure of Business Mergers

Introduction

The emerging trend of globalization influences the activities of businesses including mergers and acquisitions. Many companies are executing mergers which have taken place as a dominant vision and strategy in a corporate world. It is observed that nearly 56 percent of mergers failed to sustain the real purpose of providing optimal value to shareholders, but if companies develop a successful strategy on the basis of their knowledge they can be achieve a victory (Kearney, n.d, p.2). Implementing such big and costly cross border agreements is a result of a universal belief that industries can become more concentrated by making the world's markets more globalized. Companies think of mergers as a necessary step in order to expand their markets, but sometimes it is not worthwhile instead a company must try to achieve a title of world's leading player alone (Ghemawat & Ghadar, n.d, p.65) The companies must realize that this single move can change the path of their company, the career of their employees, and the shareholder's values (Buckley & Ghauri, 2002, p.1). Initially, when the term 'merger' takes an extraordinary place in a corporate world by combining two company's operations, it became a well known activity among the companies of United Stated. Later on, it became a normal phenomenon to expand and practice the corporate objective nearly among all the countries including those of Europe and Asia. Some countries even jump in to mergers just to deal with their economic declines (Gaughan, 2005, p.1).

Discussion

There are mix conceptions regarding mergers and acquisitions either positive or negative. Some companies, which are lucky, or undergo with detailed facts and figures of going in to a merger or acquisition tends to get success. On the other hand, companies, which just jump, in to mergers without identifying the key facts that could be risky or dangerous meets the situation of failure. Sometimes mergers resulted in significant gains to companies such as cost advantages, stock price, demand in new markets, and technological advantages. The failure in mergers usually the result of wrong estimations regarding the mergers, mismanagement of both companies, cultural differences, poor management of employees and not fulfilling the real purpose of the merger.

Companies are involved in global mega-mergers in order to consolidate the industries, and it passes through significant four phases. These four phases are opening, accumulation, focus, and alliance. In the opening phase, the market has different sized players, and the greatest market share is retained by two or three leading suppliers. Any company which enhances its performance at the beginning of the next phase it is likely to get success as compare to its competitors. The second phase of accumulation represents a scenario in which market becomes less fragmented. The companies who experience growth in the market, they realize that they can reduce cost through advantages of economies of scale and it also prevents them from a hostile takeover. After holding 40 -45 percent of market share, the leading companies ...