IHRM

IHRM



IHRM

Stage One - Part A

Global Mega-Mergers

The term merger and acquisition (M&A) are often used interchangeably while the terms merger and acquisition hold somewhat different meaning. Although each transaction differs in style, during this literature review, no empirical evidence could be found that tested the differences between mergers and acquisitions noting transactional and integration differences while both share a common approach towards to the activity.

Jemison and Sitkin (1999) contend that M&As are strategic, complex, occur less than routine, multi-faceted that has many moving parts, that can impact all stakeholder groups whose involvement is temporally and functionally divided. Jemison and Sitkin (1999) offer the following definitions of mergers and acquisitions. When one company takes over another and has a controlling interest in the minority organization the purchase is called an acquisition. An acquisition is also known as a takeover or a buyout where one organization is purchasing another company for similar reasons as a merger. A merger, typically a voluntary action, occurs when two organizations agree to bring their respective assets together and move forward as a single larger company rather than be owned and operated separately. Marks and Mirvis (1998) define a merger that typically involves a combination of two (or more) previously separated organizations into a third new entity requiring approvals from the board of directors and stockholders of both corporations. While there are many mergers and acquisitions, the majority of activity falls under acquisitions.

Regardless of methodology used to perform the merger or acquisition, many firms use an M&A to achieve various organizational objectives that can be used to expand into new markets and geographic regions, gain both technical and management expertise and knowledge, and increase the allocation of capital. M&A transactions can be part of an overall corporate strategy where management deals with the buying, selling, and combining different companies that are constructed to aid, finance, or help an organization grow without having to create another business entity. Ferguson (2003) contends that an M&A can gain synergy, increase revenue or market share, provide market and product extension, and consolidation to optimize organizational economies of scale.

Steps of a Merger and Acquisition Transaction

Selection of a target company

Addressing the management or the owner of the target company, partly with the help of an investment bank or an M & A adviser

Sign a confidentiality agreement (often called "NDA" for non disclosure agreement)), mutual knowledge and interest balance

Signing of a Memorandum of Understanding (also Letter of Intent)

Careful examination of the target company ( due diligence )

final structuring of the transaction taking into account the results of the due diligence

Evaluation and price negotiation

Contract

Registration and approval of the transaction by the Competition Authority

Transfer of ownership and payment (Closing)

Comparative Analysis of the global Mega-Mergers during 1990's and the 2000's

Schipper and Thompson observed that conglomerate banks usually pursue "acquisitions programs" that include several acquisitions conducted over a number of years. They argued that if an acquisitions program has a beneficial effect on the value of a bank, then a positive stock reaction should arise at ...