Analysis of Merger and Acquisitions

ANALYSIS OF MERGER AND ACQUISITIONS
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Introduction
In this present world of globalisation, various business companies are merging and acquiring
with other companies for increasing their profit margin and market revenue. This is essential
for all companies to concentrate as the financial profit revenue and per capita income of their
companies depend on merging and acquiring of business processes. Merging occurs between
two separate companies, most of the comparable size to combine forces for the creation of
new joint organisations where theoretically both the companies are equal mergers.
Meanwhile, the acquisition means to take over one entity by another. Mergers and
acquisitions may be completed to expand the company’s reach or gain market share in an
attempt to create shareholder value. This essay will stressfully concentrate on various aspects
of Mergers as well as acquisitions and their analysis on a global basis. The two terms have
been greatly synced in the modern world of globalisation and considered as one of the major
factors for one another. The essay will provide all the information which is necessary to
understand the difference between mergers as well as acquisitions. Along with that, the essay
will also provide specific examples with data which are essential for the essay for detailed
analysis of the topic of Mergers as well as Acquisitions. This essay revolves around negative
perspectives regarding the growth and earning profit from the merger as well as acquisitions
in the cross border area among managers. This essay tries to prove that importance of merger
as well as acquisitions in the business process and significant success level in the market.
Analysis of Merger and Acquisitions
International Mergers as well as Acquisitions who also are termed as Border M&As refer to
those that are occurring outside the boundaries of a particular country. The contribution
towards the development of international mergers as well as acquisitions is tremendous by
globalisation and international financial reforms. As influenced by the views of Rani, Yadav
and Jain (2015, p.409) it can be stated that international mergers and acquisition agencies are
performed for the task of undertaking some serious strategic benefits in the global market of a
particular country. Based on the views of Lee, Mauer and Xu (2018, p.119) it can be analysed
that this process helps the multinationals in experiencing economics of market scale and
market dominance which stimulates the growth of a direct international investment.
According to (Ahammad et al. 2017, p.183) there is an adequate amount of presence of
international mergers as well as acquisitions firm and organisations which contribute to
educational programmes and skilled training for the development and growth of the merger
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and acquisitions professionals performing in the global merger and acquisitions sector.
Examples of which are Morgan Stanley, Barclays Capital, JP Morgan and others.
The motives of the mergers, as well as acquisitions of the international market, are numerous
to be analysed. As per the views of Hosken and Tenn (2016, p.250) mergers as well as
significant acquisitions take strategic decisions for the beneficiation and upliftment of their
individual companies. They have become popular in recent times because of the enhanced
market competition in the global money market. According to Reddy (2015, p.19), there has
been significant growth of the market values of the mergers and the acquisitions because of
the breaking of trade barriers influencing greater business market all over the globe, boosting
globalisation and free flow of capital amount of money in the international market. There are
a number of motives of the mergers as well as acquisitions which are considered for having
tremendous significance because of the mergers as well as acquisitions.
The first and the foremost motive of merger and acquisitions is constructing synergies with
other companies as the market revenue of the joint organisations is higher than that of the
individual firms. As influenced by the views of Uhlenbruck et al. (2017, p.49), it can be
stated that synergy explains the market benefits other than those related to the economics of
scale. Operating benefits can also be termed as synergy benefits, but keeping aside the
operative economics, synergy rise from the capabilities and the creativity, innovation,
Research and development and market coverage capacity for complementary of resources
and skills and wide retrospect of limitless opportunities.
Diversification is another motive of the mergers as well as acquisitions, which is a common
motive to sustain risk assessment and significant risk reduction, which is tremendously
beneficial for the mergers as well as acquisitions. As opined by the views of Clark (2013) it
can be stated that the mergers and the acquisitions examine the risk which is involved or
expected to reduce the risk and establish a correlation between the earning profit revenues
and profits of the merging companies. Bishop (2015) opined that negative correlations
provide a greater reduction of risks and positive correlations provide a lesser reduction of
risks which are necessarily considered with greater threat marking by the mergers as well as
acquisitions. The motive of diversification is totally based on the fact of the combining of the
two consecutive risks of the companies. As opined by the views of Dobbs, Nand and Rehm
(2005) significant analysis can be performed in order to understand the fact that the combined
risk percentage of the two combined companies is less than that of the separate individual
companies. Conglomerate mergers mostly are beneficiary of diversification as two different
companies when poorly merge with each other and poorly correlate their individual cash
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flows to merge and create a portfolio of the merged companies. This is the reason for
combining the two different companies of separate industries for the ultimate beneficiation of
the particular company. Based on the views of Reddy (2015, p.21), it can be analysed that
firms mainly focus for the diversification of sales and growth stability, favourable growth
improvements, favourable competition shifts and significant technological changes which are
essential for the companies.
A significant example of a particular company which followed the motive of diversification
is the merger of Exxon and Mobil, which are two large oil companies of the US. they signed
a $78.9 billion agreement to merge with one another and form a new multinational oil
company called Exxon Mobil Corporation (Corporate.exxonmobil.com, 2019). The
regulations were considered and completed in November 1999. This agreement was unique in
American history as it reunited the two giant companies, Standard Oil Company of New
York and Standard Oil Company of New Jersey (Corporate.exxonmobil.com, 2019). The
company invested more than $2 billion on Bayton expansions for the further growth of the
Gulf for creating jobs. The company benefits $64 billion benefits from the company’s
investments, which is a tremendous achievement of the company
(Corporate.exxonmobil.com, 2019).
Growth is essentially significant for any organisation, whatever the growth may be.
Depending on the concept of growth, it can be evaluated that the growth of companies can be
of various kinds, which included financial, customer basis, brand related and others. As per
the views of Uhlenbruck et al. (2017, p.49), a growth-oriented company is always concerned
about steady growth and improvement of the particular company and is able to attract the
most talented and skilled executives, and it would be able to retain them. As influenced by
the views of Reddy, Xie and Huang (2016, p.957) it can be analysed that Growing operations
provide challenging factors and excitement factors necessary for the generation of the
executives and as well as the opportunities for the enrichment of their job and fast career
development. This influence of challenging and exciting factors increases the managerial
efficiency of the companies. As per the views of Blonigen and Pierce (2016, p.41) market
growth leads to higher level profit gathering, which is tremendously significant for a
particular company to increase its market growth and brand promotion. Acceleration of
growth largely depends upon two factors which are essential for all merging companies to
consider which is to expand its market share in the existing company’s market and entering
into new markets for the continuation of the business process.
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