According to the Gattiker (2007), a merger is defined as two firms whom are usually the same size that agree to join as one company that is operated and owned as one. It is a combination of two companies to create a new company. All of the assets and liabilities of the companies are shared by the one company that is formed. On the other hand, an acquisition is slightly different. An acquisition is when one company clearly takes over a second company through purchasing it. There is no joint ownership rather one company controls the other without forming a new company. Mergers and Acquisitions (M&A) have become important for most of the companies as without the M&A, most of the companies will not survive. We have seen the performance of KIA was declining over the years, after merging with Hyundai, they performed well. In the same, it is suggested for the Callaway to get M&A with any famous company, particularly with one which is leader in the automobile industry like Hyundai. They have almost same industry; therefore M&A will be proved beneficial for them (Pfeffer, 1972)
Hyundai's Acquisition of Kia
Korea's automobile market, which had developed amazingly over the very last few years, had come in a period of changeover. Moreover, to reduce the local demand since as the early and mid 90s, the industry faced from uninterrupted and over supply of automobiles. This is because of the introduction of a number of new companies as well as the expansion of existing one companies (Seungwha and Park, 2009). At that time, Kia Motor was on the position of two among the automaker within Korea in between 1990 to 1997. Fueled by Kia's ambition to be a global top ten players, significant sum of investment were made to construct out of the country plants to enlarge its production capacity. While many industry analysts viewed the expansion plan as significant progress, Kia's financial vulnerability triggered a crisis point, causing capital deficiency and forced the company to bankruptcy in 1997.
The Kia Motor's fall down can be defined in various aspects. Firstly, it must be noted out that the organization's profitability decreased with the too much local market competition which was initiated due to the the Daewoo's interest-free deals. These campaigns were the central and high in demand during the early 90s. Secondly, the KIA Company's had poor management which become the critical aspects for the reasons of the disaster (Hoon and Jae, 2000)
Hyundai's Acquisition of KIA and its Effects
Hyundai acquisition of Kia can be viewed from three broader perspectives:, economies of scope, development of a global network, economies of scale
Economies of scale
Even though Hyundai was a leading manufacturer of automobiles in Korea, get hold of Kia was ...
