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Analyze the risk of Merger and Acquisition on enterprise - Dissertation Example

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This paper assesses the impacts of mergers and acquisitions of organizations. There are many reports that indicate that over 50 percent of the mergers and acquisition fail. Most of the surviving merged enterprises do not result in increase in productivity…
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Analyze the risk of Merger and Acquisition on enterprise
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Download file to see previous pages The paper describes why the organizations purse mergers and acquisitions. There are different reasons for this including growth strategies and when seeking to enter into a new market which has been identified as the main reason behind acquisitions. In the commercial sector, larger corporations are considered to be better because such corporations are considered to have larger pool of resources to enhance their operations and to reach out to a great number of customers. In light of this, mergers and acquisitions have become the order of the day in the corporate world. Some acquisitions and mergers are so successful that it is possible to remember when the companies involved were separate and distinct entities. However, other mergers fail to accomplish their intended purposes and companies engaged either runs bankrupt, executives are sacked or they go into a corporate separation. Mergers and acquisitions get together varying people, processes, and technologies with the aim of creating a large unified organization. The organization generally seeks to gain from the synergies of the acquisition and merger by consolidating, integrating and rationalizing the people, technologies and procedures of the two organizations. Not all companies have the ability to provide the desired technology to compete effectively with other players in the market and therefore they choose to team up with other enterprises that have the desire technology or with which they can combine resources to get the needed technology. Mergers and acquisitions may also be adopted by enterprises as an attempt to mitigate their financial risks and share costs involved in research and development of a new product (Elmuti and Kathawala, 2001, p. 205). They assert that financial resources required to purse a new product may be too high for one company and therefore they may result to merger. According to Elmuti and Kathawala (2001, p. 206), when airplane manufacturers realized that construction of a large jet plane involved high cost; they formed an alliance between Boeing, Aerospatiale of France, British Aerospace, Deutsche Aerospace of Germany and Construcciones Aeronauticas of Spain. This alliance was geared towards spreading the financial risks involved in the venture among many players. The other reason for mergers and acquisitions is to help enterprises achieve competitive advantage. Elmuti and Kathawala (2001, p. 206) describe that alliances are attractive to small organizations as they provide the required tools required to give them a competitive edge. The risks and problems involved in merger and acquisition range from financial risks, relational risks, incompatible cultures, lack of trust, inadequate coordination between the management teams and differences in ...Download file to see next pagesRead More
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