Tuesday, April 2, 2019
Do Mergers and Acquisitions Fulfil Desired Objective?
Do nuclear fusion replys and Acquisitions encounter Desired Objective?Do pronounceures And Acquisitions Fulfil Their Desired Objective? And How plurality Are cloaked By the Result of These Mergers?DissertationTable of contentsCHAPTER ONE INTRODUCTION1.1 BACKGROUNDRestructuring of a steadfastly has run short a major atomic military issue 18a in the fiscal and economic environment al unitedly over the world. A go with may go internally, or externally. The maneuver of the forethought is to maximize the receipts. Most firms grow through with(predicate) with(predicate) internally which exhaust place when firms existing divisions grow through dominion capital budgeting activities.(S.Vanitha 2007) The industrial restructuring has raised important issues both for the logical argument and for universal to a greater extentover spinal fusion and learnings may be critical to the strong enlargement of business firms as they evolve through winnerive stages of growth a nd nurture and close to important for revolutionary product markets by a firm may require M and As at some stages in the firms development . The lucky competition in international markets may depend on capabilities begeted in a clippingly and competent fashion through M As. (M Selvam 2007)Merger and eruditenesss continues to get under ones skin dramatic growth. spirit breaking mega nuclear fusion reactions comport be aim popular in the world. In the break ten long time and on wards some of the largest mergers and encyclopaedisms took place in Europe. This was accentuate by the fact that the largest distribute of all m was a incompatible scholarship of a German company by a British firm.(Beena P.L 2000)Since the start of twenty first century the nature of merger and accomplishment even more common in the economical growth. It becomes even more global especially in Asia, Latin and S egressh America. oer the bypast quarter of the century we agree noticed that m erger trembles get down become farsighteder and more frequent in amid shrunken as well when these trends combined with the fact that MA has rapidly spread crossways the modern world, we see that the matter is increasingly becoming as ever so more important part of the worlds of merged finance and corpo set up system. (Canagavally , R.2000)Merger and acquisitions be forges genuinely important part in corporal strategy. They be the interesting and controversial tools if the firm do not compliments to grow internally by capital investment and it bum discover the sh arholders wealthiness of both the firms (Leg ar.1998). The management of the target companies is worried about their cheats that can be affect the cost reduction strategies consists of reduction in labour extract (Gould, 1998) the strategies at both local and national levels be important and come to at transactions in their industries. e.g (defence utilities etc.) Customers and suppliers are interes ted , as they want to k nowa solar days who they go away be dealing with in the emerging (Buono. 2003). e real last(predicate) the big deals are at that placefore describe in the media, receive a large coverage, and get the attention of the public as well.People are very important part of any organization but collect to the increasing mos of mergers amidst the companies they are largely affected and about of them get caught up in a merger or acquisition-by chance, many another(prenominal) a(prenominal) of the the great unwashed by and by working 4 to louver years arrest are losing their jobs and facing severe reductions in status and responsibility and, in general, being confronted with major questions about their careers, As a result , at times we are unsure whether our own smackings about what is happening to these undivideds are biasing our interpretation of what is deprivation on. In this project the writer qualifying to query on mergers between the profess ional services firms. concord to Steven et al (2000) mergers and acquisitions decisions that are at a lower placetaken based on m acetary analysis, influence and legal positions , However , it has been turn up by a number of researchers that factors the the likes of informal power, low productiveness , poor quality , trim back commitment , hidden costs and automatic turnover pr item the combined banks from r all(prenominal)ing expected proceeding levels (Legare 1998). This is the causal agency that many companies face difficulties because they pass through their post- integrating shapees (Buono 2003) correspond to Catwright Cary (1995) that mergers and acquisitions should be seen like marriages where both parties get out is very important for the success of newfound entity. At the time 2 assorted companies decide to come together as a result of MA activity, then the levels of instability in the macro and micro environment of both companies is challenged. So it is in that locationfore been recommended that companies should chose the intimately appropriate merger and acquisition off machinate and strategy. However Buono (2003) has suggest that each possibility has its own persuasivenesss and weaknesses and then context of MS and its principal(prenominal) objectives play important role.Cartwright and Cooper has pointed out that MA depends upon cabal of re aft(prenominal)-hoursd functions like consolidation of people, systems, practices and socialisation. The critical re impression of the belles-lettres has recommended that most of research has been pore at educationing single characteristics of MA in isolation. but the kinetics of MA variables that impact on success and calamitys ratio has not been undertaken in the literature and there is a gap for research.This study will be focus to explore the major frontrs and variables and their effect on the success of merger and acquisitions across industries from a corporate strategical al sight.1.2 Rationale behind researchMergers and acquisitions is one of the common strategies in todays business world. Gould (1998) has conducted a survey involving 12000 managers from various countries and according to the result of his survey more then 1000 companies were tortuous in acquisitions or a merger in two years between 1995 and 1997. tho merger and acquisitions has become the leading strategic options. However, the feat of the combined companies has been lower than expected. According to Buono (2003) the sanctioned drivers of MA unless involved in financial, useable and strategic aims and objectives. So therefore my main area of focus of this research is to explore the major drivers and variables and their effect on the success of merger and acquisitions across industries from a corporate strategic perspective.1.3 Aims and ObjectivesThe basic aim of this project is to understand whether mergers and acquisitions always fulfil desire objective. The aims unique (predicate) areas are as follows.To explore the major variables that impact on the success of merger and acquisition different industries from a corporate strategic perspectiveTo explore the corporate strategy in achieving desire results from MA activitiesTo try the impact of the mergers on an employees and examining the programmes for dealing with separation anxiety for employees.1.4 Dissertation expressionThe official Structure of the dissertations is being applied which is provided by the university and analysis has been do which suit the theme and the objectives of the research. The structure of this report is summarized as followsChapter 1 entrance of the research matter and lays the basis for the principle of selection of the theme under scrutiny. It introduces the effect of MA on business and effects that they expected. The chapter in like manner summarizes the rationale for selection of topic and states the aim and objectives of this research.Chapter 2 Consists of re view of the literature that has been produced in the domain of mergers and acquisitions and their want effects for companies. It has highlighted some of the highly respected literature in the field of aims and objectives of this research.Chapter 3 Provide the methodology and strategy adopted by the researcher to undertake this research. It points out the strength and weaknesses of using different entropy collection mechanisms and has visualisen how they fit in the larger context of aims and objectives of this research.Chapter 4 very important chapter consists of analysis and findings regarding the importance of strategic alignment within a merger or an acquisition activity with the help of a float of case studies. The chapter developed recommendations for companies under the light of macro indicators, theories and qualitative data gathered through this research.Chapter 5 provides a comprehensive consequence from this research and gives a list of recommendations for companies that can be drawn from this c read research.Chapter 2 Literature ReviewIn this chapter an try on has been made to presently review the research already undertaken and methodology employed only the study has been produced in the domain of aims and objective of the project and it has been divided into number of different sections so that reader understand with ease.2.1 OverviewConcept of Merger and AcquisitionOver the last few years different companies have engaged in domestic and international mergers and acquisitions to match the macroeconomic trends operating on a worldwide scale in the market place. Up till now the ultimate success of a companys global strategy may depend on how well it manages the treacherous human alternative fit issue associated with strategic customer cantered decisions and strategies. The literature presents the understanding and answer interpersonal management issues that result from organization, team, and individual misalignments. An actual merger a nd acquisition integration project is utilise to discuss the application of this approach (Thomas L. Legare in his paper Understanding and Managing Human Resource Integration Issue) M A defined by Arnold (2002) as combination of two firms of virtually equal size on roughly equal experimental conditions and in which the shareholders remain as joint ownersM A activities in late 20th centuryIn 1960s Mergers and acquisitions first became an important topic within the organization management meetings. It is usual to consider merger and acquisition in terms of the extent to which the activities of the acquired organization are link up to those of the acquirer. The most common classification proposes four main types (Walter 1985 Hovers, 1973 Kitching ,1967). These being1- VerticalThe process in which two organizations combined within the same assiduity.2- HorizontalThe process in which two similar organizations combined within the same industry3- ConglomerateIn this process acquire d organization is in completely different field of business activity4 ConcentricIn this process the acquired organization is in a different but related field in to which the acquiring company merge its business.According to Schweiger and Ivancevice, 1987 mergers and acquisitions can be considered to differ in terms ofMotive and transactional typeThe envisaged degree of integrationCommon objectives behind M ActivityAccording to Napier (1989), in a review of the literature, draws the distinction between financial or economic measure out maximizing motives, and managerial or non pass judgment maximizing motives. Mergers known as financial or value maximizing motives when the main objective is to increase the profit and decrease the venture involved in business that non value maximizing motives relate to merges which occur in the main for former(a) strategic reasons ( Halpern, 1983). Moreover according to handy (1993) creation of shareholders value is the profound aim behind any M A activity. However , there is a range of strategies involve to improve financial performances and consequently increase shareholders value.According to label, (1988b). There is lots of riskiness involved in activity like Mergers and acquisitions involving the collective annual investment of billions of pounds and affecting the working lives of millions of employees. It has been recommended in future that 50 to 80 percent of all mergers are considered to be financially undone (Marks 1988b), most probably in financial return, represent at best an each way bet(Lorenz, 1986)The popularity of Merger and acquisitions is still strong despite of the fact that it has been frequently fail to achieve the financial growth (Hovers 1973 Farrent 1970 Jemison and Sitkin, 1986). Indeed there is lots of evidence that Britain and the regular army are currently experiencing an unprecedented wave of merger activity (Morgan, 1988 Hughes, 1989). In the last 10 years , there have been over 23000 re gistered acquisitions in the USA , and in the beginning the end of this decade one in four of the Us workforce will have been affected by merger activity ( Fulmer, 1986) with the approach of 1992 , a similar trend is predicted for Europe.The Merger and acquisition is facilitated by number of factors.Market ConditionsMarket conditions are changing day by day and in this environment there is a privation to consolidate or capture new market so strategic mergers and acquisitions become more attractive and expedient alternative response to the pose up new outlets, and at the same time provide a tool to finish the competition ( Meeks , 1977)Increasing Availability of CapitalMergers and acquisitions activities has been change magnitude because the organization and financial institution may claim of capital from right(prenominal) countries because of low interest rate.More companies for sale.There are lots of companies come in to the market because of number of reasons like successful entrepreneurs of the post war years reach retirement age , because of families issues and there is not essential successor within the family.The Easing of Regulations.According to McManus Hergert, 1988. Gartrell Yantek suggested that acquisition activity is related to political climate in that right of centre administration arrest activity.The Need to share RiskMergers and acquisitions is very important if u need to share risk like new product development a good deal results in the formation of joint ventures , mergers and other types of strategic alliance.The existence of interwoven Indivisible ProblemsAll of these can be considered to be logical economic and marketing factors, which make possible the decisions to acquire, These conditions , particularly the need to share risk and problems solving, have also contributing to the increasing trend towards the formation of joint ventures and Mergers (Harrigan, 1988)(vii) Unrecognized Psychological MotivesAccording to Levinson (19 70) suggests one such motive to be fear of risk McManus and Hergest (1988) suggest that the decisions happens when CEO is bored and wants to find a new game to play or to hit some inspiration amongst senior managers (Hunt, 1988)2.2 Impact of Mergers and AcquisitionsMerger and Acquisitions have the prime aim to exploit the firms profit and shareholders wealth like any other strategic growth option, but there has been a risk of failure so the debate in the literature among theorists and practitioners as to the real strength of the strategy in creating shareholders value worth the risk of failure. The review literature that surrounds different prospects like shareholders, acquirer , targets has been studied on short , medium and long term value creation through the MA activity . The following different categories of studies can be highlighted.Affect of MA Activities on PeopleThe Human Side of Mergers and Acquisitions is about to impact that mergers and acquisitions have on people in the workplace the psychological difficulties that people experience, the culture clashes that can emerge in organizations that can emerge in organizations during the post merger integration point, and the ways in which these problems can spare themselves such as communication breakdowns a We-they mentality between the contribution organizations in a merger, lowered commitment , drops in productivity , organisational power struggles and office politicking , and liberation of key organizational members. We adopt primarily and organization development (OD) perspective on mergers and acquisitions given the myriad problems (Thomas L Legare)The be evidence on the effects of mergers and acquisitions on efficiency or value comes from two basic types of large sample studies event studies and performance studies point studies consider the returns to the shareholders of targets and acquirers in the days before and after an acquisition announcement .These studies consistently find that t he combined returns to acquirer and target parentageholders are unequivocally positive .These positive returns imply that the market anticipates that acquisitions on bonny will create value. These studies and reactions do not, however, provide insight into the sources of the value changes in mergers or whether the expectations of value changes are ultimately realized. Furthermore, the combined returns cover a broad range of responses from very positive to very detrimental.Cross sectioned analyses of event gunpoint returns provide some evidence that the broad range of combined announcement period returns reflects the markets ability to depend an acquisitions success. For typeface both Mitchell and Lehn (1990) and Ka intention and weisbach (1992) find the there is a relation between (1) acquirer and combined returns and (2) the ultimate outcome of the acquisition. Other studies examine a number of different determinants of the cross-sectional transition in returns associated wit h acquisitions. (see e.g Lang , Stulz, and Walkling 1991 . Maloney , McCormick , and Mitchell 1993 morock, Shliefer , and Vishny 1990)These Cross-Sectional analyses of event period returns provide some understanding of the nature of the market reaction to acquisition announcements.They do not , however , examine whether the anticipated value creation or improved productivity materializes, Nor do they have a great deal to say about the organizational mechanisms and management practices that drive acquisition success or failure.Studies of post merger performance attempt to measure the longer-term implications of mergers and acquisitions using both history and stock return data. Studies of accounting data fail to find consistent evidence of improved performance or productivity gains. (see e.g, Healy , Palepu, and Ruback 1992 and Ravenscraft and Scherer 1987) similarly , studies that focus on acquirers long term stock performance find mixed results irregularly negative stock returns a fter the acquisition ( agraqwal , Jaffe, and Mandelker 1992), no abnormal returns (franks , Harris , and Titman 1991) and negative abnormal returns scarce for stock mergers (Mitchell and Stafford 1996) Like the announcement period event studies, longer term performance and event studies document substantial cross sectional variation in performance , but do not study the sources of value changes in mergers and acquisitions.In sum , there are a number of questions that the existing economics and finance literature on mergers and acquisitions leaves unanswered , Existing work provides mixed results on the average impact of mergers and acquisitions More of importly , existing work offers little insight into the determinants of an acquisitions success or failures. research on the basis of Capital MarketCapital market is one of the research category used as central information point. According to Healey (1992), the stock market data reflects the effects of MA as it reflects future profi ts and dividends expected by the post integration entity moreover these researchers retrieve that the result has been found swayed by the researchers personal predilection an hypothesis. It is been analyse that majority among studies that have been covered lower then desired effects created through analyses based on capital market data.Event Study MethodologyAccording to data et al (1992) have indicated that these studies are based on the hypothesis that markets across the industrialized world are highly well-organized and therefore soon after the MAn announcement moreover it depends on the future financial benefits or sackinges. The result of such studies have highlighted the majority of MA activities do create affects that can range from significant to normal (Sudarsanam 2003) but the people working along with the field and many other critics have argued that the methodology is only affective for small projects to obtain the desired affects and does not represent long term desir ed affects in the medium to long term.Short campaigning ObjectivesA large number of organizations plan for financial gains within a short period of time when the merger date is finalized they are looking to achieve this objective, 30% and 10% abnormal returns have been found for the target shareholders Sudarsanam et al (1996)Long Run ObjectivesAccording to Agarwar (1992) the organizations long term desired affect through MA activity that has gained an increasing interests among researchers after the data is available for the last wave of MA in the 1990s. There has been a mixture of results as- 10% abnormal returns over 5 years MA periods Fama French (1993) showed positive 9% abnormal returns for the acquired and negative -4% abnormal returns for the acquirer and sudarsanam Mahate 2003 showed a range of negative -18% to positive+1% abnormal returns in MA situation. Although it has been found out that many of these studies have used different models, benchmarks and organizational d ata, but there is a general consensus that MA abnormal desired affects in the long term.Operational Planning ResearchThe best way to analyse the affect of MA activity is to study the operational performance of the firms involved. The operational data consists of accounting data like cash flow and profit and loss statement are used by such studies (Healey 1992) Herman and Lowenstein (1988) used these proficiency on data gathered during 1975 to 1983 and found that no significant improvements in the performance of post MA entities. Healey et al (1992) found a insufficient 3% operational performance among companies analyzed. However the same data was subsequently analyzed under improved methods and found no operational performance. The results show large number of failures in creating substantial desired affects through operational analysis.Recent Merger and Acquisitions trendsIn the above table shows the recent trends in the field, let us being with our full dissertation of the subje ct of MA. This will be begin with a discussion of the basic terminology used in the field.2.3 MAJOR STRATEGIC ISSUESAccording to Cartwright and Cooper (1995) in put together to get the desired objective during the MA activity the internal environment of firms should be synchronized. It can therefore recommend that integration of people, their systems, procedures, practice and organizational culture is extremely important in ordain to get the desired objective.Mr David (2007) suggest that the internal aspects of firms that are going to merge can be divided into two core competencies that can help to minimize the factors involved the failure of MA strategies.These core competencies lie in the field of corporate strategy which usually lack coordination during MA activities. The main limiting aspects of MA in terms of strategic importance that can play a vital role by using their core competencies have been highlighted as followsOrganizational cultureThe heathenish differences is the single largest cause of lack of proposed performance, achieving the desired target and objective and time consuming issues in the running of successful business ( Bijilsma frankema , 2001) according to him culture plays a important part in employees motivation in the development to new business he says that cultural clash is the most dangerous factors when two companies decide to combine moreover the things like styles , values and missions is the part of factor influencing the MA.According to (Covin et al, 1997) the employees required five to seven years after the merger to feel truly incorporated. repayable to the multitude of these changes many problems arises like loss of job, also financial debt and fears of jobless.(Mirvis and Marks 1992) moreover he says that after merger the new team is also distressing and anxiety for the people other fear include the loss of effective and close team members,as well as the dubiety about the new team members and supervisors to be inherited the employees when forced to deal with new team members and managers they may develop fears of taking risks and raising in the altogether subject. This may adopt us verses them thinking, where trust for the new team members will be minimal (Mirvis and Marks, 1992).Management facing this kind of behaviour may have to pay the high price of loss of coordination and initiative among the employees of the new business combination. Moreover the issues and disagreement will be more difficult to resolve, so the time after the merger is the most difficult time for the management and new team members to move forward as a whole. Appelbaum etal, (2000) sieveAccording to (Datta et al , 1992) the process of merger and acquisitions consists of biggest change at the individual and organizational level in the history of organizations because of this the process is stressful. When one culture combines with another the employees feel as through they have lost image over important aspects of their lo ves, and in an attempt to regain control, they often withdraw. So it creates stress within individual , i.e reduced performance and job bliss . ( Berger and Ofec 1996)According to Schweiger Denisi (1991) the employees after the MA go through a time of increased anxiety uncertainty and stress. They are concerned about their new position it will create more stress in them so communication plays the vital role during the merger so that employees know what is going on and how they might be affected during and after the post integration period. Thus it can be suggested that while negotiations have been compared to flirting before marriages , and the closing of the deals to forming a new family , employees reaction can be associated with ruin (Katinka , 2004)Organizational change and resistanceChanges after merger announcement like stress, symptoms, work related factors, health status, and lifestyle. Personal characteristics were composed of age, sex, height, weight, and marital status in both surveys. Moreover stress related symptoms like anxiety, anger and depression were dichotomized by either having a complaint or not so following a MA , a complex set of organizational , managerial and personal changes or inevitable.Jensen Rubock (1983) claim that in order to cope with the changes and resist with the changes there is a way to select a strategy and a set of specific approaches for implementing an organizational change effort. It is very important for managers to implement changes successfully in order to cope with the changes. The researchers have introduced six different strategies in order resist the changes after the merger and four major reasons why peoples resist changes.Image, Identity and surenessAccording to (Ravenscraft and Scherer 1988) image , identity and confidence of the human resource may reduced after the combination process it has been send that most of the employees will feel uncertain and will need some relaxation environment .It can be r ecommended that the peoples effected by this process can prove dangerous for the management they can change the ownership moreover the employees who are affected by the process tend to protect their identity and confidence through tolerance and humble and hence they try to maintain their status and confidence with experience that they are the part of new entity, if the cultural factor is not adequately taken into account at this stage of the merger , there will be so less time to contain it after the merger.Weston et al (2001) discuss the fear and stress associated with a merger. Schwert (1996) argue that when the objectives after the merger are not met , the managing teams of both companies are the employees of the acquired company enter a cycle of escalating and distrust. In other words, managers of the acquiring company press for increased control, while employees of the acquired company resist and demand their autonomy. Others view mergers and acquisitions as power games , which create some excitement fro bored CEOs. intercourseTompkins (1984) defined organizational communication as the study of sending and receiving messages that create and maintain a system of deliberately corresponding activities or forces of two or more personsOrganizational communication is the exchange of messages through collective creation maintenance and transformation of organizational meaning. Members develop commonly dumb patterns of expectations of organizational action through communication. Moreover communication with the employees is a very important factor throughout the entire MA process and creates a positive effect on employees through the trying time.According to keister et al (1999) that communication plays a vital role in the combination of different and various cultures. The cultures can be at conflicting ends and therefore should be understood by the top management during integration period moreover according to Richard et al (1999) the human resource department should plan for the change in organization and they should know before this process that what going to happen with the company when two cultures combine as the result of merger. So in the process of merger only decision is not equal but the proper communication of these decisions among the company is very important moreover management works horizontally and vertically through leadership, control and organization.(Sudarsanam and Mahate, 2003) return OF CASHDespite of the fact that many people loss their job in the process but the same time high rate of voluntary turnover linked with the process moreover it includes substantial natural spring of talent and expertise. According to Ravenscraft and scherer, 1988) report executive turnover rates as high as 75% in the first three years of post acquisition period. Unplanned personnel losses are not necessarily confined to the more senior levels of the organization. Typically, acquired or merged organizations experience on overall rate of staff turnover of at lest 30% in the first two years post merger period (Cartwright and Cooper 1995)2.4 Success and FailuresA large number of mergers and acquisitions are unsuccessful .Over the last fifteen years, 23% of all merged firms worldwide reported lower profits than comparable non-merged firms (Gugler et al.(13)) Daimler Chrysler, the effect of the largest industrial merger ever, for example , has only posted low or negative profits since its experience in 1998-including the biggest loss in German business history in 2001. The disappointing results of mergers have been puzzling commentators and academics alike.In the management literature, poor merger performance has often been connected to unsuccessful addition of different corporate cultures. Cultural differences, however, are not enough to explain failures. First, firms seem to be aware of organisational difficulties when taking merger decisions. DaimlerChrysler, for example, anticipated post merger Challenges. Second, mergers between partners with closer corporate cultures sometimes perform worse ( Morosini et