Mergers and Acquisitions: A Study of Concepts and Implications

Mergers and Acquisitions
MERGERS AND ACQUSITIONS
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Mergers and Acquisitions
Table of Content
Abstract......................................................................................................................................3
Mergers and Acquisitions..........................................................................................................3
Introduction................................................................................................................................3
Methodology..............................................................................................................................4
Research body............................................................................................................................4
Differences Between mergers and acquisitions......................................................................4
Types of mergers and acquisitions.........................................................................................5
Arguments of mergers and acquisitions.................................................................................7
Merits and Demerits of mergers and acquisitions..................................................................9
Review of relevant literature on M&A....................................................................................10
Overview of Corporate M&A in the UAE...............................................................................11
Conclusion............................................................................................................................11
References................................................................................................................................13

Mergers and Acquisitions
Abstract
The main aim of this research paper is to study in detail and understand the concept of
mergers and acquisitions in a United Arab Emirates corporate business environment. The
objective is to establish the main issues that can be associated with merging and acquisition
especially the motives, the types and the disadvantages and advantages of acquisitions and
mergers. The paper will also distinguish merger from acquisition and ascertain whether it is
harmful or beneficial to firms that want to enter. The report reveals that mergers and
acquisitions directly affect profits, leverage buy-out and dividends. The study concludes that
Mergers and Acquisitions often stimulate development and economic growth of a nation. It is
therefore recommended that mergers and acquisitions be carefully implemented by firms so
as to avoid fall out.
Mergers and Acquisitions
Introduction
The key purpose of any firm is to maximise profit over the years so as to increase shareholder
wealth by increasing dividends. The business word is growing at an alarming rate prompting
organisations to adopt different tools and techniques for profit maximisation. Some events in
the market require organisations to respond quickly in order to achieve a lot of gains such as
launching a new product, portfolio increase or when joining new markets (Bonaime, et al,
2018). With these events firms require a lot of financial resources so as to achieve objectives
in a short time while enjoying market monopoly during that period. Organisations especially
small and medium sized who are unable to raise enough finance to satisfy the growing
demand experience huge problems and are left with an option of either merging or exiting the
market. Essentially mergers and acquisitions are the only viable options for small
organisations to survive in emerging markets (Wu and Chiang, 2019). Mergers and
acquisitions are not the same but normally used interchangeably.

Mergers and Acquisitions
Methodology
For research purposes the study considered a corporate merger and acquisition scenario in the
United Arab Emirates (Lebedev et al, 2015). This being a qualitative study the research
questions how and why mainly, a deep study of the reasons is also carried out for better
knowledge and understanding of mergers and acquisitions in regards to strategic planning and
due diligence.
Research body
Mergers and Acquisitions can be defined as a process that involves combining two
companies into one with a goal of achieving synergy whereby the formed company is much
greater than the two former entities. Mergers typically occur when two similar businesses
agree to join forces by recognizing the benefits of the other company in terms of efficiencies,
improved capabilities and sales increase. Often the two companies become equal partners
with mutually agreed fair terms in the new venture.
Acquisition happens when one company buys another company then operates it as one.
Acquisition is normally implemented by purchase of a company’s asset or by acquiring more
than fifty percent ownership of a company’s paid up share capital (Howson, 2017). The firm
taking over is referred to as the acquiring company and the weaker company being acquired
is the target company. The acquiring company is more superior in terms of structure, size and
operations. Depending on the beliefs of the company that is being acquired the process can
be friendly or hostile, some acquired firms prefer to be an operating unit and others prefer to
be incorporated.
Differences Between mergers and acquisitions.
Although commonly used within the same context mergers and accusations are not
synonymous;