Failures of International Mergers and Acquisitions

8716 Words Mar 13th, 2008 35 Pages
Table of contents

Introduction 3
Types of Mergers 3
Types of Acquisitions 4
Motives behind M&A 5
Problems faced in Mergers and Acquisitions 6
Problems faced in Cross Border Mergers and Acquisitions 7
Sony's Acquisition of Columbia Pictures 8
Sony 8
Columbia Pictures 9
Analysis: Star Framework 9
Fig: Choice of Entry Mode 15
Failure of the Acquisition 15
Reasons for the Failure 16
Merger between Daimler-Benz and Chrysler Corporation 18
Daimler-Benz 18
Chrysler Corporation 18
Analysis: Star Framework 19
Reasons for the Merger 22
Failure of the Merger 23
Reasons for failure 23
Culture Clash 23
Mismanagement 25
Literature Review 27
Conclusion 29

Introduction
Mergers and acquisitions (M&A) and corporate
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Another type of acquisition is a reverse merger, a deal that enables a private company to get publicly-listed in a relatively short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly-listed shell company, usually one with no business and limited assets. The private company reverse merges into the public company, and together they become an entirely new public corporation with tradable shares. Regardless of their category or structure, all mergers and acquisitions have one common goal: they are all meant to create synergy that makes the value of the combined companies greater than the sum of the two parts. The success of a merger or acquisition depends on whether this synergy is achieved.

Motives behind M&A
These motives are considered to add shareholder value:
• Economies of scale: This refers to the fact that the combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to theoretically the same revenue stream, thus increasing profit.
• Increased revenue/Increased Market Share: This motive assumes that the company will be absorbing a major competitor and thus increase its power (by capturing increased market share) to set prices.
• Cross selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for
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