Mergers and Acquisitions (M&A) are increasingly becoming a novel approach for companies to wade through the competitive pressures of today’s globalized society. The increase of mega-mergers in today’s corporate world demonstrates the entrenchment of such transactions in modern business practices. Definitions of Mergers and Acquisitions “One plus one equals three”. This statement defines the main logic that informs merger and acquisition transactions. This logic stems from the fact that most companies aim to create a bigger shareholder value than the sum of the shareholder value that would ordinarily be realized if two corporate entities merge. The reasoning behind merger and acquisition transactions therefore stems from the fact that there is a greater value when two companies work together, as opposed to two companies working in isolation. Mergers and Acquisitions (M&A) are therefore joint activities where the activities of two or more companies merge to create one common purpose for both Continue reading
Corporate Strategies
Case Study: The Daimler Chrysler Failed Merger
In 1999, the Daimler Benz corporation of Germany merged with the Chrysler Corporation. In merging, the two companies aimed to create a company with a global presence and to bring the strengths that each company had to the global automobiles market. At first sight, the companies appeared to be equal partners in the merger. The companies at the time of the merger were almost equal in size. In addition, the companies appeared ideal for a merger because each had specific strengths which could be complemented by the other. Chrysler, founded and having its main operations in the US, was a company that emphasized innovation and flexibility while its counterpart, Daimler Benz, was a company characterized by structured, hierarchical management and German engineering excellence. These apparent equal partners were thus ideal for a mutually beneficial merger. In addition, the two companies were among the market leaders in their areas of specialization, and their Continue reading
Case Study: The Strategic Alliance of Fiat And Chrysler
Corporations, firms, and companies implement stringent measures to improve operations during periods of severe financial constraints. Many livelihoods depend on their stability and it would be unethical to fail to take action. In addition, it is necessary to protect the investments and interests of stakeholders who would be affected if the businesses collapsed. Therefore, it is crucial for organizations and companies to take necessary steps to safeguard interests of stakeholders. The 2009 strategic alliance between Chrysler and Fiat was a bold move towards saving Chrysler, a company that had operated for many years. The merger was a major setback for Chrysler to a certain degree. Chrysler lost a lot of money when it allowed Daimler to relinquish its portion of the company to Cerberus because the offer price was less than a quarter of the initial capital. However, the merger saved Chrysler because it was in a financial crisis that Continue reading
Cultural Integration in Mergers and Acquisitions
First, it is necessary to understand why the field of cross-cultural differences is vital to business interactions. In many situations, it is beneficial for companies to merge. Some businesses are failing to perform on their own, but still possess resources that may be valuable for businesses in the same sphere. Other companies aim to expand to increase their growth and support the rising demand for their services. Overall, joint ventures and alliances happen to raise the value of the merging entities, whether this value is connected to the brands presence, technologies and other resources or economies’ scaling. Cross-border acquisition and merger can be motivated by these factors as well – companies often want to enter new markets, for which international collaboration is essential. Its unique challenge, however, is that the market the foreign company is entering is completely new to it in many aspects. Merger and acquisition (M&A) are processes Continue reading
Case Study: Analysis of Daimler-Chrysler Merger
The merger between Daimler and Chrysler was designed to create a complex multinational automobile manufacturer with a market worth of more than $130 billion. The merger was supposed to ring paradigm shifts in the way that cars would be made and driven. But unfortunately, the great upheavals and changes that were predicted did not happen and the merger sunk into a morass of cultural mismatch. Synergies between Daimler, a German company, and Chrysler, an American company could not develop. For the merger to be successful, a climate of mutual trust, learning, creativity common values, and ethics needs to be developed first. When two companies merge, there needs to be a balanced change management policy where both parties are given their due right and encouraged to exchange ideas for mutual growth. Daimler tried to ramrod its policies on the resilient Americans who resisted and this resulted in a war of attrition in Continue reading
Major Theories of Mergers and Acquisitions
Nowadays, the business world is looking for continuous expansion to generate higher revenues and enhancing the quality of the production processes. Additionally, mergers and acquisitions contribute to the strengthening of the competences and stimulation of the core competitive advantage while facing the increasing and intense competition in the world. Nonetheless, the significant differences between mergers and acquisitions tend to exist due to the different nature of the phenomenon. The takeover and acquisition imply having control of the acquired firm’s equity by 50 %. In turn, the merger implies the creation of the new business unit. Despite having slightly dissimilar nature, the intentions remain the same, as they remain an essential instrument to stay competitive on the market. In turn, the concept of the synergy enhancement also has to be taking into account while improving the quality of acquisitions and justifying their importance. It is commonly known that one of the Continue reading