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Mergers And Acquisitions - Essay Example

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This essay "Mergers And Acquisitions" investigates that the complexities of the corporate mechanics have been cited as some of the possible causes of these failures. Usually, mergers and acquisitions are primarily driven by the objectives of growth and survival…
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Mergers And Acquisitions
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Download file to see previous pages Usually, mergers and acquisitions are primarily driven by the objectives of growth and survival. A large company will seek to acquire a smaller company for the purposes of benefitting from certain synergies in various aspects of the business operation. This may include an expanded market segmentation or technological development. Companies with nearly the same market profile may merge to enhance the level of efficiencies of operation and minimize on operational costs. On the other hand, smaller companies may be willing to be acquired by bigger firms due to a hostile market environment or unpalatable market forces (Sherman, 2012, p. 67). In essence, mergers and acquisitions are aspects of business strategy. In business, there exists the possibility of a mismatch between strategy and reality. Errors of judgment by directors may lead to ill-conceived mergers and acquisitions particularly resulting from the effect of misguided information or the flux nature of the global market forces. It might be important to analyze the rising cases of failure from this perspective. Why Directors Prefer Mergers and Acquisitions Despite the recorded failures, corporate directors have continued to pursue mergers and acquisitions with remarkable determination. Usually, the pursuit of these goals is strategic in the sense that they aim at achieving a certain goal in the business operation. The synergistic benefits of engaging in mergers may tend to surpass the possible risks involved (Moeller & Brady, 2011). Directors often decide on mergers basing on certain strategic goals. Decisions are taken after cost-benefit analyses are conducted with regard to the possible risks involved in the purchase. A merger or an acquisition may present the most appropriate alternative to the growth and expansion alternatives available for the company (Sun, 2012). For instance, a company may want to expand its technological infrastructure within a specified period of time. Some of the factors to be considered include times, cost, and reliability of the development. The firm may choose to enlist the services of experts to carry out this particular development. Alternatively, the firm may choose to enter into a merger or engage in an acquisition with a firm that is already established in terms of technology with a sound technological infrastructure (Buckley & Ghauri, 2002, p. 22). This move would have saved the firm a substantial amount of money, which would be directed to alternative areas of development. Another reason why boards of directors still engage in mergers and acquisitions is to be seen in terms of expansion strategies. Market discourses of globalization and liberalization have brought about stiff competition in most areas of business operations. Mergers and acquisitions provide the most effective way for a company to consolidate its hold on a certain market segment with the short-term and long-term objective of locking out external competition (Lucks, 2007). When two large corporations enter into a merger, they are most likely to expand their market reach and intimidate other firms that may seek to operate in their business niche.  ...Download file to see next pagesRead More
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