Mergers and Acquisition: A Literature Review

Running head: MERGERS AND ACQUSITION
MERGERS AND ACQUSITION
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Literature Review
Mergers and acquisition
Mergers and acquisition refers to the process of transfer of ownership from one company
to other or consolidating the company’s ownership with other company’s ownership. Business
organization carries out this activity of mergers and acquisition for the purpose of changing the
nature of its business and to gain a competitive advantage over its competitors with the help of
the same (Bettinazzi and Zollo 2017). It is a part of strategic management as with the help of the
Mergers and acquisitions the company can downsize its business or even grow. The major
difference between mergers and acquisition is that mergers refer to consolidation of the two
businesses such that one new business can be formed as a result of such mergers (Andrikopoulos,
Gregoriou and Kallinterakis 2016). On the other hand, acquisition refers to taking over the
ownership of another company’s stock and others. Another major difference between merger and
acquisition is that in case of one, there is the process of placing ones business under the
ownership of other company however, in case of mergers both the companies get equal share of
ownership (Burton, Obel and Haakonsson 2015). The main advantage of this mergers and
acquisition is that the companies can share each other’s resources and they also need to share the
liabilities. Mergers and acquisition affects organizational structure and behaviour, reframing,
change management, HMO agreements, strategy for the same proper leadership to look after all
the activities (Davenport and Barrow 2017). There are different advantages and disadvantages
related to the acquisition and mergers. Some of the major advantages of mergers and acquisition
are that the two companies can also merger their resources and therefore helps both the
company’s to take advantage of the same. The main disadvantage however is related to risk of

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loss of ownership by either party (Crasnic, Kalyanpur and Newman 2017). There are different
reasons for mergers and acquisitions some of the major reasons include to create financial
synergy, to take advantages of economies of scale, mergers and acquisitions lead to
diversifications and various other benefits (Park 2019).
Synergy
When companies undertake mergers and acquisition, they can take the benefits of
financial synergy, performance synergy and various other synergies resulting from availability of
huge amount of resources and others (Reddy and Xie 2017).
Eliminate unnecessary competition
With the help of mergers and acquisition, the companies can avoid unnecessary
competition and this allows the company to acquire a greater market share and to offer better
commodities to the customers and therefore leads to increase in sales (Meyer and Peng 2016).
There can be different types of mergers and acquisitions such as based on the functional
roles-these include horizontal, vertical and conglomerate, on the basis of outcome of business,
there can be mergers and acquisition and includes- consolidated mergers and statutory mergers.
There are various other types of mergers such as- strategic mergers, acqui-hire and equals
mergers. However, not all mergers and acquisitions are successful and hence a lot of factors need
to be considered before carrying out merger and acquisition and there is a process for the
carrying out proper merger and acquisition (Reilly and Williams 2016). There are five main
stages in the same- The process begins with pre-acquisition requirements that involves carrying
out proper self-assessment to identify the needs for M&A (Sindi et al. 2019). The second step
involves screening and searching suitable company for this purpose of merger and acquisition,

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the third step is investigation of the chosen company to gather necessary information about them.
The fourth step involves carrying out proper negotiations with the chosen company and entering
into a merger or acquisition agreement.
Growth
Mergers and acquisition leads to growth many times because of improved organizational
capacity and also when one reputed organization acquires another, the other can take advantage
of the goodwill associated with the acquiring company (Stanton 2019). Moreover when a big
company acquires small company it can help it to increase its sales and grow through making use
of the financial resources and other resources.
Reducing additional costs of the supply chain
In case of acquisition and mergers, the company can purchase a supplier or even the
distributor and therefore avoid additional costs due to other participants in the supply chain. It is
called the vertical merger, and it helps in avoiding the costs that the supplier was previously
adding (Lebedev et al. 2015).
Opportunities for Middle East country companies and the Aldar properties:
Mergers and acquisitions have unprecedented opportunity for all the Middle East
companies and especially Aldar properties because these will provide many benefits to the
company such as an expansion in the financial resources and many others (aldar.com 2019).
Aldar properties have recently undergone some major acquisition that has given it an opportunity
to add value to its portfolio. These acquisitions are expected to improve the estate sector of Abu
Dhabi and therefore help in developing the nation as a whole. In fact this move of the Aldar