International Mergers and Acquisition - International M&A - Essay Example

The last decade experienced an upsurge in International M&A which stood highest at the global transaction of US$1.3 trillion in the year 2006. Apart from its expansion, the higher failure rate of these mergers and acquisitions cannot be ignored. Usually, M&As are targeted to achieve financial and economical outcomes which ultimately cause failure because under cross-border mergers and acquisitions culture and psychological understanding become the primary concerns and are overlooked quite often. This paradox in international mergers and acquisitions has grabbed the attention of many scholars which resulted in diversified literature that developing business strategies, identifying and mitigating risks, overcoming national and cultural gaps, and improving workforce commitment may lead to success3.

Yet there are several studies negating the direct impact of cultural gaps influencing post-acquisition performance. This paper provides a descriptive and critical analysis of the mergers and acquisitions framework. The study will explain both mergers and acquisitions in detail, their strategies, influences on both countries, motives for M&A, risk in mergers, and how they can be mitigated, etc. Horizontal mergers occur when two companies providing competitive or similar services are combined under one ownership.

Horizontal mergers usually ensure more sales since the sale of similar products and services earns a greater share of the market4. On the other hand in the case of complementary goods, horizontal mergers help provide a wider range of services to the customers. So, diversity, variety, and multiplicity are the basics of horizontal mergers. Horizontal mergers help achieve higher returns and revenues by product diversification while such greater revenues do not even require time and resources to establish new products5.

Horizontal mergers are also helpful in targeting extended geographical representation. If another company has its product representation in such a region that is not in company one’s distribution list then horizontal merger help covers larger audiences beyond geographical boundaries6.