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Economics of Mergers and Aquisitions. Management motives and theory behind the proposed Boots/Alliance Unichem merger - Essay Example

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The number of mergers of companies of different sizes and performing in variable industries, acquisitions and alliances created in the last decades has exceeded the number for the years before which in the 1960s, for example, were mainly unions between conglomerates. According…
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Economics of Mergers and Aquisitions. Management motives and theory behind the proposed Boots/Alliance Unichem merger
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Download file to see previous pages ical integration and diversification of production achieved usually leads to only humble profits and no dramatic increases in value of the companies going into the merger, with several exceptional cases of extremely successful mergers. Study in 1999 revealed that up to 75% to 83% of the mergers failed meaning lower productivity on post-merger process for both companies, decrease of shareholders value and accelerating absenteeism. The main reasons for the failures are the improper resources allocated and as a result insufficient company strengths, weaknesses, opportunities and threats analysis; poor merger management, due diligence of the company prior to merger, irrational optimistic expectations of the synergy effect; badly planned post-merger strategy and vision development due to slow post-merger companies integration, contradicting corporate cultures, absenteeism of risk management within strategy development and others.
As can be observed from the information above, the results are not always rewarding no matter what is the initial reason for the merger or acquisition. The analysts have drawn three acquisition categories2, with first being the plan and prosper acquisition aiming at connecting a company with high goodwill and one with low disparity operating in similar markets and the first with superb skills and expertise taking over the second one. The second type of the merger is the stand and hold acquisition which is often seen as conglomerate and mergers a company with high good will with one with high disparity due to decreased market share and profits by the first and wish to remain the biggest player on the market. The low goodwill and low disparity merge and grow acquisition is the most known strategy to gain market share subject to be done very rapidly in order to succeed. The fourth strategy is to unite low goodwill and high disparity companies and is the least desirable strategy as both companies lack efficient knowledge and skills to share ...Download file to see next pagesRead More
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