Mergers and Acquisitions: A Case of System Failure
Abstract
New business environment has provided an opportunity to corporate organizations to become global the acquisition and merger: Corporate mergers and acquisitions (M&A) have become popular all over the world duri the last few decades thanks to globalization, liberalization, technological developments and intensely competitie business environment. There seems to be a great rush of Indian organizations to achieve global status through acquisition. In 1988, the number of acquisitions by Indian companies were just 15 foreign companies, which have now grown to more than 1/8 foreign companies by 2009. It is very tempting for a business leader to w r ite merger or acquisition for instant growth. However, one needs to understand that it is a very complex task and requires detailed planning and execution with great care. The synergistic gains from M&As may result from more efficient management, economies of scale, more profitable use of assets, exploitation of market power, the use of complementary resources, etc. Interestingly, the results of many empirical studies show that M&As fail to create value for the shareholders of acquirers. This paper discusses the various reasons for failure of merger and acquisition, and impact of merger on shareholders value, and how acquisition and mergers can be made accessful by global companies.
Authors
Deepti Tripathi