International Mergers and Acquisitions - JP Morgan - Essay Example

Strategic transactions are different from commercial transactions as they are defined as dramatic events for the companies and often represent either the end to a company as an independent business or at least a dramatic change in its management, ownership, and fate. Mergers acquisitions also fall in the category of strategic transaction (Frankel). The concept of mergers and acquisitions are modern business concepts however they throw utmost challenge and difficulties in the process of business organization and operations.

It is imperative to say that every individual involved should possess a clear understanding of the maneuvering progression. In today’s complex competitive business milieu mergers are sometimes regarded as the policy of long-term business survival. Mergers & takeovers The process of buying, selling and combining companies are referred to as Mergers and acquisitions commonly referred to as M &A. The notion with which the acquiring and the target companies feel that they can reap potential benefits by financing, mutual cooperation in the inter as well as intra industry environment without the utilization of mammoth cost and new infrastructure development.

It may be the case that sometimes companies acquire another company against their will basically recognized as hostile takeovers. In the takeover scenario, the takeover company will be generally purchasing the majority of the outstanding shares of a target company. After merging the firms may adapt the name of the acquiring company, the target company, or just develop a new name. In the United States, mergers and acquisitions substantially require several approvals to be met such as the Federal Trade Commission and the Department of Justice.

The regulatory body acts as the protection mechanism which ensures that the mergers are not able to gain monopoly power which will stand in the process of exploitation. The development procedure of the mergers and the acquisitions are so complex and difficult to initiate that they are often kept as secrets in some cases even from the knowledge of their employees. When mergers and acquisitions are successful they are generally announced in the public domain and it is generally a boon for the shareholders and it acts as a prior signal for the reduction in costs with increasing revenues.

Again joining with the competitor a company will possess higher market power and a simultaneous rise in the market share will generate (Gersdorff & Bacon, 2). The companies generally enter into merger acquisition for the purpose of enhancing long-term competitive advantages in the support of strategic goals. The strategic notion may also be of fundamentally defensive in nature as when there is a predominance of a large number of mergers in a particular area then the non-merged companies may be forced in order to merge with other non merged companies in order to maintain the competitive position.

A speculative notion arises when the acquirer views the taken-over company as a commodity. Another form of speculative rationale arises when the acquirer purchases an organization with the intention of bifurcating the acquired organization into pieces at a price higher than the cost of acquisition. Sometimes the mergers or acquisitions may be forced on a company because of management failures.