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Pro Merger And Anti Merger - Essay Example

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The pace of mergers has reached to extreme heights without showing any sign of subsiding in the nearby future. A new round of consolidation begins in one industry after another. A research by A.T. Kearney shows that 50 percent of mergers are not successful and it fails to produce shareholders value (Kearney, no date, pp.1-5)…
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Pro Merger And Anti Merger
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Download file to see previous pages This draws the attention of media to the spate of marriages. The articles had shown a slew of divorces from trade to local to business press. The most recent ones are the AT&T’s announcement of its division into four entities – business, broadband, wireless and consumer and separation of British Telecom into retail and wholesale segments in its fixed line business in UK. It is difficult to identify the logic behind the changes in activity. In the world of mergers and acquisitions, the chaos still remains. The deeper analysis shows the consolidation of industries conforming to set of laws. The companies analysing the position of their industries on the consolidation curve and developing strategies according to that led them to win. The study conducted by A.T. Kearney shows that a distinct pattern is followed by the activity of consolidation. It makes progress in four phases with varying lengths. Mergers vary proportionally in reverse order to the extent of consolidation. Each consolidating industry passing through four different stages are opening, accumulation, focus and alliance. The time period from first stage to final stage stretches over 20 years approximately. An industry can increase its merger and acquisition from starting at low level of concentration till the saturation is reached.
The activities of merger are also dependent on the movement of stock. The rising stocks provide considerable acquisition currency to the companies (Maire and Collerette, 2010, p.281). Massive deregulation in economic sectors and growing globalization also affect consolidations as the levels of stock market affect it. They drive stock prices and consolidation. Consolidation also boost stock prices because the top management is judged in terms of growth usually on its performance and also because the mergers open the access to international capital markets. Other than the phase specific development and cross industry patterns, there are other factors that accelerate industry consolidation like capital market pressures, globalization, advent of internet, technology infrastructure to support networking. More value can be achieved by the company which is demanded by the capital markets through acquisitions and mergers. The infrastructure of technology providing the facility of communication to companies outside their own walls influences the activity of consolidation. The communication via internet and potential of integration facilitates the management of complex enterprises. This makes more mergers and acquisitions possible. As companies strive to get bigger, market fragmentation is followed by consolidation waves. On reaching a certain degree of concentration, the mergers decline. The businesses focus on its core competencies at that time until it no longer look for merger and acquisition rather it choose alliances. Knowing the phases and patterns of the activity of merger and acquisition enable the knowledgeable players understanding the scene of merger in their industry, evaluating the ...Download file to see next pagesRead More
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