Strategic Decisions : M & A

Mergers and acquisitions have become a growing trend for companies to inorganically grow a business within its particular industry. There are many goals that companies may be looking to achieve by doing this, but the main reason is to guarantee long-term and profitable growth for their business. Companies have to keep up with a rapidly increasing global market and increased competition. With the struggle for competitive advantage becoming stronger and stronger, it is almost essential to achieve these mergers. Through research I will attempt to dissect the best practices for achieving merger success.

An emerging market economy offers large market for the consumer goods with a high growth potential. Moreover there are defined as high growth potential economies where the institutional framework is not clearly developed yet. One of the greatest ways of entering emerging markets are mergers and acquisitions. The purpose of this way is to enhance capacity fast, provides a direct access to networks and distribution channels etc. Researchers are necessary to choose the appropriate method to enter the market.

Mergers and acquisitions (M&A) strategies have been popular among U.S. firms for many years (Hitt, Ireland, & Hoskisson, 2013, p.195). Firms use merger and acquisition strategies to improve on their ability to create more value for all their stakeholders, including shareholders’ (Hitt et al., 2013, p.195). A merger is a strategy through two firms that agree to integrate both of their operations. Although, most mergers that are completed are friendly in nature, acquisitions can be friendly or unfriendly (Hitt et al., 2013, p.196). An acquisition is a strategy through which a firm buys a controlling, 100 percent, or interest in another firm with intent of making the acquired subsidiary business part of their portfolio (Hitt, Ireland, & Hoskisson, 2013, p.196).

In our days mergers and acquisitions are a predominant feature of the international business system as companies attempt to exploit new market opportunities and to strengthen their market positions. Each year sets a new record for the total value of mergers and acquisitions and nearly every day new announcements are made in the business newspapers.

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.

Mergers and acquisitions, better known as M&A, is a “…term used to refer to the consolidation of companies” (Investopedia, 2014). “Mergers can allow companies to combine forces and stake out a greater portion of market share” (Alli, 2010). A company may choose to merge with or acquire another company for a multitude of reasons such as “…maximize[ing] shareholder value. (Ferris & Petitt, 2013)”

The completions and interests in Mergers and Acquisitions (M&A) is growing largely day by day (Michael A. Hitt, Jeffrey S. Harrison, R. Duane Ireland, 2001) During the recent recessions companies are looking into different ways to stay afloat, to grow and even continue to exist, and one of the best ways of doing this, is to merge or acquire another company (Dash, A, 2010) Lynch (cited in David Faulkner, Satu Teerikangas, Richard J. Joseph, 2012) also believes in some instances growth can take place within sector integrations which includes horizontal or vertical or even by going into a new sector by acquiring a new business, which is called diversification. A Merger or Acquisition takes place when two or more companies join

According to a global strategic business development expert, Mona Pearl (2011), the chances for global expansion are unlimited, and the potential for exponential growth is persuasive. Regardless of size or company structure, organizations which take a proactive, strategic approach to understand both risks and costs will stay one step ahead from competitors and get the benefits of a successful globalization origination. To create successful global business strategy plan, the company has to ask its customers the right questions at the right time to the right people. Start with strategy, understand the culture, and identify competitive edge are three keys to successful globalization. First, the company should start with strategy not tactics. The company must begin with developing a long term action plan which is connect to company vision, mission, and activities. The company must use the benefit from corporate strengths while identifying chances in desirable and compatible markets. It is important to understand the people and their culture, and examine each market, before answer any tactical questions. Because of lack of international experiences, most managers move toward by using what they are comfortable with, or its calls tactics (Mona, 2011). As Mona (2011) advised, “Tactics is an actions in a vacuum without a well-conceived conceptual framework” (p.214). Tactics would lead to bad assumption in market choice, because of the lack of strategic direction. For example, Latin

One of the greatest indicators of the success or failure of a corporation is their ability to acquire/merge or to be acquired/merged. Companies have been able to maximize their profits by merging or acquiring other businesses within their industry, which has many benefits that extend past dollars and cents. Corporations who are able to acquire or merge with other companies are able to expand upon their ability to forge partnerships with other corporate leaders. They are often able to expand their services internationally to gain more profits and extend their brand. Corporations, such as McDonald 's Corporation, have been able to benefit from acquisitions in ways that corporations, such as Sonic Corporation, have not. Through the evaluation of the strategies that were utilized by McDonald 's Corporation to acquire Boston Market, its impact on the corporation, and its international business-level and corporate-level strategies, one can better understand strategies that Sonic Corporation could develop to increase their profits through acquisitions and mergers, as well as business-level and corporate-level strategies they can develop to expand their services internationally.

The modern world has seen the formation of firms as a mechanism of integration, which enables individuals to develop an enterprise and to combine capital and expertise from different individuals. Mergers, especially the mega-mergers, change the market structure. Mergers and Acquisitions (M&A) have unparalleled capability to transform firm and supplement corporate renewal. Research in M&A has been done taking into consideration a multitude of disciplines, e.g. finance, economics, law, business, strategy formulation, organization theory, human resource management and sociology. M&A becomes a real time phenomenon due to the attention it receives from different walk of life.

In the strategic management, it contains two aspects, strategy and objectives and business model. As we know, M&S is one the UK’s leading and the biggest

Literature on theories of M&A shows that the motives of companies incorporates M&A ,are gaining operating and financial synergy, diversification gaining economic of scale, increasing the market power and the increase of shareholders values.

In the past decades, the behaviours of merger and acquisition (M&A) have been active in the worldwide markets. This phenomenon is mostly driven by the desire to leverage synergies to increase stock price and profits, expand market share, and diversify market risk. A firm’s variability of stock return, defined as risks, can be divided into unsystematic and systematic risk (Hillier et al., 2013, 784). While unsystematic risk affects a specific firm or single asset, systematic risk affects a group of assets or businesses (Hillier et al., 2013, 304). Many empirical studies have shown how an M&A announcement influences stock performance in the market by examining abnormal returns, yet returns are related to specific firms

Additionally, through acquisition, enterprise can be benefited with reduced industry rivalry and increased market power to bargain down the input price over suppliers and raise up the selling price to buyers. In contrast, there are challenges associated with acquisition. The biggest challenge in the international acquisition is how to deal with inter-culture difference. Overestimating the economic benefits also contributes to the failure to increase profitability.

Gupta (2013) mentioned the different motives organisations have for pursuing a merger and acquisition deal are strategic, financial and organisational motives. Conversely, Wheeler et al (2014) go to state the trends for an M&A deal are based on factors such as oil prices, capital availability, oil acquisitions, or strong valuation.