Advantages And Disadvantages Of M & An Operations

According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:

Conglomerate Merger: Here companies are from different industries. Here the business or products are totally different, no way related. They merge their operations because that overlaps. This kind of merger leads to unification of different businesses from different industry and verticals under the umbrella of one brand or firm.

Becoming a larger more efficient company with a strengthening competitive position opens up the opportunity for more mergers and acquisitions of competitors, suppliers and/or customers.

One key financial driver would be to gain new capital assets. Merging with another company is a faster and often a more inexpensive way to gain capital assets without building new facilities and hiring inexperienced staff. Merging allows you to gain

In regards to acquisitions, it is important to distinguish between mergers and acquisitions. In a merger, two companies come together and create a new entity. In an acquisition, one company buys another one and manages it consistent with the acquirer’s needs. An acquisition that involves integration has greater staffing implications than one that involves separation (Rizvi, 2008). A combining of companies is a major change. Mergers and acquisitions represent the end of the gamut of options companies have in combining with each other. It is the mergers and acquisitions that are the combinations that have the greatest implications for size of investment, control, integration requirements, pains of separation, and people management issues

Mergers and acquisitions are a very important part of today’s corporate finance. It is seen as an important tool for the expansion of a company and to further its growth prospects. CEOs of big companies wish to actively participate in M&A processes to turn the enterprises into big conglomerates, thereby achieving profits and gains from the acquired firms in the future. M&A activities however involve a long and complicated procedure of decision-making and this process is fraught with a lot of biases. Empirical evidence has shown that most of the acquiring firms fail to reap the expected profits from M&A activities.

In recent times, merger and acquisition are considered as one of the important steps for strategic growth. A company can plan to merge or acquire another company if it thinks it is a good investment, or they will earn a sound investment from it. The primary goal of any company entering into merger or acquisition is to boost the shareholder wealth. From a financial perspective, merger is carried due to diversification. It is the process of reducing the risks through investment decisions. For example, many a times, a company is highly at risk since it has done enormous investment in one industry then it can intend to buy a business in another industry (Sky Plc, 1990). This is termed as acquisition and can be beneficial for the host country.

Merger and acquisition is a corporate strategy entailing the selling, buying, and combining or dividing business entities in a bid to facilitate rapid recovery or growth. A merger is distinguished from an acquisition in the sense that an acquisition entails a take-over. A merger involves a combination of business assets of two companies forming an entirely new one ADDIN EN.CITE Mehnert2008259(Mehnert, 2008)2592596Mehnert, M.Negotiation: Definition and Types, Manager's Issues in Negotiation, Cultural Differences and the Negotiation Process2008Santa Cruz, CA 95060Hammer, Patrick, Tanja Hammer, Matthias Knoop, Julius Mittenzwei, Georg Steinbach u. Michael Teltscher. GRIN Verlag GbR9783640183234http://books.google.co.ke/books?id=CoeiECIdYUsC( HYPERLINK l "_ENREF_1" o "Mehnert, 2008 #259" Mehnert, 2008). In this paper Mergers, acquisition and international strategies are discussed looking at two companies: American Airlines Group Inc and American Media Inc. the paper discusses these companies looking at the strategies they have deployed in their operations and the possible gains for such strategies.

While we know our country’s business history is filled with mergers and acquisitions over the decades, the reasons behind this M&A activity are less obvious. We should now address the real issue of why companies merge. 3

While terms of merger either acquisition are commonly used to define a wide range of transactions, in fact, they are all different according to specific conditions of each. Therefore, researches distinguish M&A activity according to its nature. Amit R. (1989) classifies three main types of mergers on a basis of target firm’s nature: anticipated bankruptcy of a target firm; exceptional performance or high liquidity of a target; and target firm being a remainder of a greater one. However, this generalised classification is not widely adopted by researchers which rather prefer to employ a conventional classification or, to be more precise, they classify and sub-classify M&A by their perspectives.

Eliminating competition: Merging allows companies to eliminate a future competition and gain a larger market share in their products market

In theory, merging can bring about Synergy. The value of both the offeror’s company and the offeree’s together are of higher value compared to each of the two companies individually. Benefits may arise

Then in eighties, when the managers were not able to focus on the unrelated businesses, they went for de-conglomeration phase in which they sold of the unrelated SBUs so as to focus on the core businesses. The author discusses the framework of Corporate Acquisitions and discusses various types of acquisitions like Vertical, Horizontal, Product-Market Extension, and Unrelated Extension. The author further discuss the role of marketing in mergers and acquisitions as it is mentioned that marketing plays either direct role or a participative role in the decision making. For example, for customer service or product support, marketing plays a direct role in formulating strategic decision for the same.

Today’s fast growing globalize economies and competition have forced industries to fine ways to survive in today’s perplexed business environment and generate profit for their shareholders. There are many methods to develop the organizations one of them is Mergers and Acquisitions. This is where strategies for success are developed by acquiring new companies or by the merger of two (P.Gaughan, 2000).

M&A can benefit companies in various ways and the main advantage is all the potential economies of scale that can arise from the deal (Pettinger, 2012). For example, the firm benefits from cost savings that are associated with marketing and technology.