Mergers and Acquisitions
Mergers and Acquisitions, and the decrease in activity around this area, is a topic acutely relevant to management consultants and the overall business environment. The number of notifications to the Competition Authority was down thirty per cent in 2009 according to law firm McCann Fitzgerald (Maeve Dineen, Irish Independent, 2010). The facts also show that there was a decrease in the number of transactions in the second quarter of 2010, down to fifty-two to sixty-two, a drop of more than sixteen per cent (www.iicm.ie). A similar trend has continued in subsequent years. This movement is relevant to management consultants as organisations utilise ...view middle of the document...
These last-minute changes could be translated as resistance from the targeted companies. This can lead to various and widespread problems for an acquiring or merging firm, some of which will be discussed in this paper.
M&As occur when two or more independent companies combine their operations into one new entity (de Man and Duysters, 2005). The motivation behind targeting M&As is often the notion of synergy. Synergy here refers to the idea that combining two businesses increases the value of the companies involved (de Pamphillis, 2010). This area incorporates economies of scale, scope and learning. The way in which companies approach these three important factors is a key role of management consultants. Consultants have a readily-available supply of knowledge and experience on these elements which makes them a vital component in the success of an M&A process.
Mergers vs. Acquisitions
A merger is a process in which two or more companies combine to become one, pooling all resources (www.chinabusinessphilippines.com). Usually the management of both companies share control and all company names are often retained in order to leverage the equity of both brand names (www.china businessphilippines.com). Reasons for mergers include:
* Defensive move (particularly in an economic downturn),
* To avail of synergies (successfully merged companies can work more effectively together than either would separately),
* Acquire resources and skills,
* Increase competitiveness (www.greenparkpartners.com).
Examples of successful mergers include GlaxoSmithKline and Sony Ericsson.
In contrast, acquisitions occur when one company ‘absorbs’ another company in order to assume control of the target (www.investopedia.com). Reasons for pursuing an acquisition strategy include:
* Destroying the competition,
* To gain entry to new markets,
* To learn new capabilities,
* To increase diversification.
Examples include Vodafone acquired Essor Hutchison and Newscorp acquired MySpace.
In relation to Steve Laird’s Carrington Wealth Management, a merger rather than an acquisition may be best suited in the present situation. Management consultants would likely advise Mr. Laird to target a merger rather than an acquisition in order to avoid the pitfalls associated with the latter. Management consultants would be able to assist Carrington Wealth Management in evading these hazards.
An essential aspect of any M&A process is a successful integration between the bodies involved. This is an area where management consultants can truly be the difference between triumph and failure. This subject would be of significant interest to Carrington Wealth Management, as it is the integration step of M&As where success or failure is achieved.
Dean Eldon Fish (2007) suggests that managers should focus on a successful integration stage in order to attain a winning merger process. This outlines the importance that an experienced...