Challenges and Theories of Merger and Acquisition: A Case Study of DeWaal Pharmaceuticals and BioHealth Labs

Running Head: CONTEMPORARY MANAGEMENT
September 22
2018

CONTEMPORARY MANAGEMENT 1
Executive summary
Merger and acquisition of organization in the global market are becoming more effective to
enhance the business value in several contexts. Organizations adapt the strategy of merger or
acquisition in with a thinking that value of two different organizations will be more in
together. Therefore, organizations acquire relatively small business and merge with
competitive business. In this process there both the acquired as well as acquirer get to
enhance their business value to make their business more efficient and profitable. In this
manner there are different theories to explain the process of merger or acquisition which are
categorised based on the purpose of merger or acquisition. In this report there is a case of
merger of two pharmaceutical businesses to enhance their business value in the same market
using their individual’s strengths. In such cases there are issue arrived in the process to affect
the effectiveness of the process. These issues have to be resolved to make it effective
otherwise such processes may give negative impact as well. This report identifies and
resolves such merger or acquisition issues arrived in the merger process of these two
businesses.

CONTEMPORARY MANAGEMENT 2
Table of Contents
Introduction................................................................................................................................3
Literature review....................................................................................................................3
Case........................................................................................................................................4
Integration process.....................................................................................................................4
Challenges..............................................................................................................................5
Theories..................................................................................................................................5
Efficiency theory................................................................................................................5
Inefficient management theory..........................................................................................6
Synergy gain theory...........................................................................................................7
Diversification theory.........................................................................................................7
Strategic realignment theory..............................................................................................8
Market power theory..........................................................................................................8
Recommendations to resolve the conflict values.......................................................................9
Recommendations....................................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

CONTEMPORARY MANAGEMENT 3
Introduction
In the concept of corporate restructuring, Merger and Acquisition commonly referred as
M&A is an important part (Aitken, Berndt, Cutler, Kleinrock, & Maini, 2016). The basic
concept of merger and acquisition is that the value of two organizations together is more than
that of the value of the same companies separately (Sarala, Junni, Cooper, & Tarba, 2016).
Such a merger or acquisition is basically a consolidation (Weston, Mitchel, Mulherin, &
Salwan, 2010). Today in the globalizing world there is news in the newspaper and on
television channels about merger and acquisition of companies. Some of the most common
mergers or acquisition taking place is finance, chemicals, pharmaceuticals,
telecommunication, oil, and many more (Wolfe, Stressman, & Manfredo, 2011).
In the given case scenario there is a merger of two pharmaceutical organizations namely,
DeWaal Pharmaceuticals and BioHealth Labs. In this merger both the organization faced so
many challenges during the process. This report identifies and critically evaluates those
challenges with the help of theories and model defined for the M&A process. At the end of
this report, both the organization will be able to understand their problems and will also get
some help to control these challenges with the help of theories made in the literature work for
the similar situations.
Literature review
Initially, in the past decades, merger and acquisition were only for financial transactions to
control the overvalued assent of companies. At that time, the main motive of mergers was the
cash flow for debt repayments (Galpin, Timothy & Mark Herndon, 2010). Today, this typical
process of merger and acquisition is more strategic and operational as well (Mignani, Huber,
Tomas, Rodrigues, & Majoral, 2016). With the advanced research work available for such