Running Header: Running Header: MERGERS & ACQUISITIONS

Mergers & Acquisitions

Mergers & Acquisitions

Introduction

Introduction

Mergers and acquisition (M&A) varies from country to country. Some countries have laws regulating M&A while others don't. M&A basically is a combination of two or more businesses into one new business. What defines the merger or acquisition is how the combination is brought about. Mergers are usually negotiated between parties before the combination occurs while acquisition does not necessarily have to go through negotiations between parties. Mergers and Acquisition can succeed or fail base on a number of factors. This paper will examine the concept of mergers and acquisition, why M&A fail and possible recommendations

Discussion

Merger is defined as the consolidation of two organizations into a single organization. Acquisition is the purchase of one organization from another when the acquirer maintains control (Borys and Jemison, 1989 quoted in Schraeder& Sefl, 2003). For example, ExxonMobil is merged between Exxon and Mobil. Philips has performed many M&A throughout its history, such as in 2009 with the acquisition of the Italian coffee machine maker Saeco and in 2008 with Genlyte and Respironics (Philips Annual Report 2009). There are domestic M&A and cross-border M&A. Domestic M&A are conducted within the same country. Cross-border M&A involve two companies from two different countries. After 2000, the fifth M&A wave came, that is crossborder M&A. This provides a challenge to the success of M&A. Many studies have been done to find out the success factors. My research also focuses on cross-border M&A.

In the domain of the M& A research, some scholars have classified M&A into five aspects: strategy management, economics, finance, organization theory and human resource management (Larsson and Finkelstein, 1999).Birkinshaw, Bresman and Hakanson (2000) defined four “schools of M&A” that cover these five aspects, categorizing them into parts according to different theories and functions:

1. The Capital Market School examines the stock holder's equity and tries to create the biggest profits for the stake holders. They also investigate the stock price fluctuation before and after the M&A.

2. The Strategic Management School focuses on creating the industry's value and understanding how strategy affects M&A. By expanding the economic scale, increasing market power, the industry will improve its efficiency and effectiveness.

3. The Organizational Behavior School studies the change of organizational behavior before and after M&A, such as integration of the organization and how employees behave during M&A.

4. The Process Perspective School focuses on avoiding mistakes during the acquisition and it believes that the industry can create value after M&A by good process management.

Post-acquisition integration is difficult, being it domestic or international. However, the integration between firms from different countries is more challenging. Since this focuses on the integration process, this leads to an approach of the organizational behavior school. The organizational behavior school focuses on the behavior implications of acquisitions, both at individual and organizational levels. This is part of the human side of M&A. Human side analysis examines with organization resistance how the people involved deal with uncertainty, stress, and ...