Mergers and Acquisitions in Todays Era - Coursework Example

Contents INTRODUCTION 3 RATIONALES FOR ACQUISITIONS 3 BACKGROUND OF COMPANIES 4 Oracle Corporation 4 Art Technology Group Inc (ATG) 4 ART TECHNOLOGY INC ACQUIRED BY ORACLE 4 Reason for Acquisition 4 Impact of Acquisition 5 CHANGES IN HUMAN RESOURCE PRACTICES - ART TECHNOLOGY INC AFTER BEING ACQUIRED 5 WORKS CITED 7 INTRODUCTION Mergers & Acquisitions in today’s era have been common phenomena. As we witnessed global financial meltdown, companies having minimum financial cushion had to face negative trends in growth and earning. On the other hand regulators came forward and offered the concept of companies with better financial health taking over companies struggling. All this with mutual consent of both companies. Merger & Acquisition could be termed as part of business tactics and way of managing buying, selling and dividing of company as per market regulations (Weber & Tarba, 2012). It could also be termed as form of reforming in order to enhance performance and productivity of company (Bengtsson & Larsson, 2012). As per past trend it has been proven that acquisitions have been a bitter step. Records have shown that around 50% of them have ended up in failure. Process itself is very complex. There are many external and internal factors having direct impact on the outcome (Aharon, Gavious, & Yosef, 2010) RATIONALES FOR ACQUISITIONS Rational behind a particular acquisition could be countless and in many cases is dependent on the circumstances of organization itself. Strategic Objective is one rational behind a particular acquirement, for instance a particular company wants to enter a lucrative emerging market but on the hind sight lacks the skill set required to operate in such market. One way of dealing with such a problem is investing in research and development. Whereas on other hand a company can just acquire a company having formidable strength in target market (Collan & Jani, 2011) Another objective behind acquiring another firm is Speculative Objective. In this case a heavy weight company buys a company which it reviews as having potential to grow. After developing the acquired company, the owner sells it in market at a much higher price (Mergers: New Game, New Goals) Above two stated objective are key behind majority acquisitions which take place or have taken place. Some more reasons behind acquisitions could be Management failure acquisitions can also be imposed on an organization because of failure of top level management. Error while making strategies or simply error while aligning of strategies against core objective of company, or market conditions may change significantly during the implementation timescale. Financial necessity is when strategies are not according to core objective of organization and so suddenly drop in market value of company. This leads to liquidity crunch and loss of shareholder confidence due to constant drop in market value of firm (Schweiger & Walsh, 1990) BACKGROUND OF COMPANIES Oracle Corporation Oracle Corporation is an American international computer technology firm headquartered stationed in Redwood City, California, United States. The company specializes in developing and selling computer hardware systems and enterprise software products. It focuses more on its own brand name of database management systems. Currently second largest in software making industry in terms of revenue generated behind Microsoft (Oracle) Organization also works on database development tool and software’s which could be termed as middle tier. Art Technology Group Inc (ATG) Art Technology Group (ATG) was an sovereign Internet technology corporation focusing in ecommerce software and on-demand optimization applications. But later was acquired by Oracle on January 5, 2011. However ATG continues its own operations but as a subordinate of Oracle. ART TECHNOLOGY INC ACQUIRED BY ORACLE On 1st January 2011 Oracle acquired ATG Inc for $6.00 per share in cash, or approximately $1.0 billion (Wire) Reason for Acquisition Behind given acquiring was to assist businesses grow profits, reinforce customer loyalty, improve brand name in market, attain improved operating results, and boost business presence across online and established commerce environments. As per analysts the move was made to enhance its own portfolio and customer base. Impact of Acquisition Acquisitions could be termed as fruitful in some cases; the impact of acquisitions on various sections of an organization may differ in accordance to altitude. Buying of an enterprise mainly aims at improving profitability and efficiency of a company. However it also concentrates on reduction in expenses (Stahl, Larsson, Kremershof, & Sitkin). The news was received positively by market as well as both employees and shareholders. Major impact was Oracle emerging as major contender in commerce platform and aligned it with its different applications which were CRM to ERP to its retail and supply chain software.  According to many senior analysts Oracle had made a mistake of buying at 45% premium compared to value different independent agencies had assigned to it. Thus raising serious questions about investment tactics being employed by Oracle. On other hand several market players stated it as a good deal as ATG has strong positioning in ecommerce platform. However they also stated that integrating acquired business in its own system would not be elegant. Such an acquisition would definitely be a sign of growth in ecommerce sector and will be an attracting proposal for other opponents out in market. CHANGES IN HUMAN RESOURCE PRACTICES - ART TECHNOLOGY INC AFTER BEING ACQUIRED Most important resource that a company in today’s era processes is its intellectual resource i.e. people working in an organization. Performance of a company is directly proportional to the moral and well being of its employees. However an acquisition on morale of workers has a major impact. In case of re-structuring of business not managed effectively, this could serve negatively on morale of employees (Bengtsson & Larsson, 2012). With two different organizations combining there are two sets of workers. Both sets have their own working style and culture. And often it becomes really difficult for employees belonging to acquired firm to adapt to culture of new organization. Hence uncertainty prevails which slowly leads to low morale. As trend persists always a company with strong financial and market position acquires a company having weak position in market. With operations being efficient, it would require less number of people to conduct operations. Hence this automatically leads to the concept of downsizing which in corporate world is a ruthless concept. Employees being laid off are mostly from the firm which has been acquired. Hence employees being laid off will also consist of employees having specialized skill set. Immediately such employees would be hired by other competitors operating within same market. Such firms will eventually benefit and would gain certain edge over the organization which has acquired. While industry would be flushed in with unemployed labor force. Pay levels would go down as supply of labor would be greater than demand for such skill set available in market with ease (Aharon, Gavious, & Yosef, 2010). On higher level of an organization, such acquisition leads to clash of top management due to their ego issues. It so happens that managers are asked to implement such plans which don’t match their vision or liking. This leads to diversion of where either managers move on or try settling scores through office politics (Olie, 1994) While acquisition process of Art Technology Group Inc by Oracle Corporation, reports reflect that ATG employees were quite optimistic and were looking forward to working in a new challenging environment of software giant. Hence on ground fear factor wasn’t present. Flow of information from top level management to lower level was efficient and hence employees were not kept in dark about what was coming. On other hand Oracle Corporation had done enough research on culture existing in ATG Inc. hence they knew as to how they were functioning and what form of culture existed in ATG. So relevant trainings were designed in order to train incoming resource in the most favorable manner. Few modification were made as to raising the level of skill set required and additional trainings which ATG Inc employees required in order to be effective and efficient while contributing towards core objective of Oracle Corporation. ATG Inc already had high standards for its intellectual resource and hence when it was acquired minor changes were required, which have been previously mentioned. WORKS CITED 1. Aharon, D., Gavious, I., & Yosef, R. (2010). Stock market bubble effects on mergers and acquisitions. The Quarterly Review of Economics and Finance , 456-470. 2. Bengtsson, L., & Larsson, R. (2012). Researching Mergers & Acquisitions with the Case Study Method: Idiographic Understanding of Longitudinal Integration Processes. New York: Center for Strategic Innovation Studies. 3. Collan, M., & Jani, K. (2011). A Procedure for the Rapid Pre-acquisition Screening of Target Companies Using the Pay-off Method for Real Option Valuation. Journal of Real Options and Strategy , 117-141. 4. Mergers: New Game, New Goals. (n.d.). Retrieved from MergerIntegration.com. 5. Olie, R. (1994). Shades of Culture and Institutions-in International Mergers. Organizational Studies , 381-405. 6. Oracle. (n.d.). Oracle. Retrieved from www.orafaq.com 7. Schweiger, D., & Walsh, J. (1990). Mergers and acquisitions: An interdisciplinary view. Research in Personnel and Human Resource Managemen , 41-107. 8. Stahl, G., Larsson, R., Kremershof, I., & Sitkin, S. (n.d.). Trust Dynamics in Acquisitions: A Case Survey. Human Resource Management . 9. Weber, Y., & Tarba, S. Y. (2012). Mergers and acquisitions process: the use of corporate culture analysis. Cross Cultural Management: An International Journal . 10. Wire, B. (n.d.). Business Wire. 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