Mergers & Acquisitions: Success Factors

This assignment delves into the critical factors contributing to the success of mergers and acquisitions (M&A). Students will examine various aspects, including cultural differences between merging entities, effective integration strategies, and the impact on post-merger financial performance. The analysis will draw upon a provided bibliography of academic research and online resources to support arguments and conclusions.

INTERNATIONAL
FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK A .........................................................................................................................................3
TASK B...........................................................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Merger and acquisition is the process which helps in combining the two companies with
each other. It helps in increasing the profit of each other and support them to work in a proper
manner. It aid in generating the economic gain which helps in improving the per capita income
and GDP. Along with this it also leads in reduce the threat of takeover by other companies. The
capital investment get increase which further promote in producing quality products and
services. The present research is based on the internation merger and acquisition in the four
major countries which contributes more in the global economy. The four host countries are UK,
USA, Germany and Japan. In these countries they have good economic growth and it is clearly
found that many organisations work together to support each other and increase the fair
competition chances(Calvani and Alderman, 2010).
TASK A
It is analyse that from the last few years the takeover market has become significantly
more active. It helps in increase the profit and growth of many companies and provide a platform
which aid them in doing their business activities at the global level. But sometimes the merger
and acquisition get failed and know how some companies are still target in merger and
acquisition. There are various number of motives which apply by conducting this approach
which helps in the providing a smoothness in the merger and acquisition. The motives of this
approach is as follow:
1. Synergy
2. Agency3. Hubris
Synergy: From the past years it is examine that many firms main motive in engaging in merger
and acquisition was the synergy. This hypothesis suggest that the value of the combined
company is higher than an individual organisation. It is found that in UK and USA many
companies perform this activity through which their business value get increase and the dividend
provided to their shareholders also get increase(Changqi and Ningling, 2010).
Agency: Under this hypothesis it is identify that it clearly helps in increase the welfare of the
shareholders. This process helps them in getting large number of shareholders. It is also termed

as the private benefit motivator. By engaging in merger and acquisition it helps in examine their
own value in several ways.
Hubris: This theory states about the psychological effect of overconfidence, the bidder
management could incorrectly assess the value of the other firm. Managers pay more to the
acquiring firm which leads in identify their value overestimate. Overconfident managers
overestimate the return to their investment project. One of the generic case of the hubris
hypothesis is paramount in 1994 in which Viacom overpaid by more than $2 billion.
In merger and acquisition it take more time. Sometimes it takes more than one year to
merge and acquire one company by another. But it is more approaching method than the joint
venture(Cooper and Finkelstein, 2014).
Some of the example of joint venture are Sony Ericsson which was one of the most
famous joint venture.
There are mainly five types of merger which helps the two companies to bind their
business or one company acquire other and provide profit to each other by exchanging their
services. The five known type of merger are as follow(5 Types of Company Mergers):
1.Conglomerate merger
2.Horizontal merger
3.Market extension merger
4.Vertical merger
5. Product extension merger.
The basic elaboration of these forms of merger is described under which signifies that
which merger support most(Ferris, Jayaraman and Sabherwal, 2013). The term chosen to the
merger describe that is it depend on the economic function, purpose of the business transaction
and relationship between merging companies. Hence their evaluation is as follow:
a) Conglomerate: It is a type of merger between in two of the companies which are of the
different nature. They both are completely unrelated with each other. There are majorly two
types of the conglomerate merger which are pure and mixed. Pure conglomerate includes such
type of companies which do not relates with each other where as on the other hand mixed merger
involves the aim of market extension and product extension. One of the major example of
conglomerate merger is between Walt Disney and American Broadcasting company(Shi, Sun
and Prescott, 2012).

b) Horizontal merger: This form states the combined working of two organisation which are of
the same nature. It helps in increasing both of them to get the more market share. It is common in
such type of firms which are working in the same field and are few in number. One of the
example of this type of merger is between the Idea telecom and Vodafone. They recently merge
their organisation to gain the market share(Gugler, Mueller and Weichselbaume, 2012).
c) Market extension: A market extension take place when two companies are engaged in same
nature of working but in the two different markets. The main reason behind this is to attain the
market and expand the size of operations. This helps in attain the bigger client base with higher
customer rate. Eagle Bancshares Inc by the RBC Centura is one of the most known merger in the
market extension.
d) Product extension: This extension of merger take place between two business organisation
that deal in product which are similar in nature and in the same market. The main reason behind
this merger is to earn the higher profit than others and make group together to achieve the target
customer base.
e) Vertical merger: According to this framework two companies which operating their business
in the same market world. But their aim is of providing a specific finished product. Most of the
logic behind this type of merger is to increase synergies creating by the two companies. This
type of merger can seen in the hospitality industry(Halkos and Tzeremes, 2013).
The basic reason behind merger and acquisition is that it helps in complete the interest of
two different organisation. This is one of the most important factor because with the help of this
concern economic growth ca be improved. This also leads in creating job opportunities and aid in
improving the lifestyle of many people.
Acquisition means acquiring of one company by another. This process aid many small
firms to acquire by large organisation so that working can get improved not only of the large
firms but also of the small firms. It also helps in improve the working quality. So the services
serving by them provide a benefit to attain target customer base. Hence, merger and acquisition
helps many firms to expand their business at the global level with maximum number of services
and products.
It can be done within the same nature of companies, two different nature companies etc.
along with this it is totally different from the joint venture process but the major drawback of
merger/acquisition is that it takes lots of finance and time(Holburn and Vanden Bergh, 2014).

More and more finance is needed for this process because two organisations now running
their business. So they have to take care about each and every one interest. The economy of the
UK, USA, Germany and Japan is high due to wide range of business merger(Mahesh and Prasad,
2012).
TASK B
Harmonisation is refer to as the ethical manner of working in context to the business. The
process of standardising laws, regulations and practices to facilitate the expansion, fairness and
efficiency of competing in a globalised economy as in integrated financial market, international
accounting standard, harmonised trading practices and sharing of technology for information
dissemination(Marks and Mirvis, 2011).
Harmonisation helps in making the fair business practices which leads in getting the faith
of each other while merging and acquisition. Many firms have to adopt fair path in this process
because it promote the goodwill of an organisation.
While expanding the business at the global level, an international market have different
accounting standard. This leads in crate so many problems which restricts many firms in smooth
working manner. This is a major problem while conducting business at large scale.
The legal regulations are also different at the global level. Each and every country have
different norms and values which are related with their local market(Phillips and Zhdanov,2013).
Like if any UK company wants to expand their business and have a wish to set up their business
in Germany so for this concern they have to formulate their working pattern according to
Germany and formulate their strategy and policies according to the local market needs and
demands(Sarala and Vaara2010). And also by according to the legislation of the companies act
of Germany which they are follow. Some of the possibilities which have to taken into account by
the international harmonisation in the merger and acquisition field are as follow:
1. It enables many firms to set up their business at global level and maintain their accounts
according to that standard. This also helps them in making a comparison between their
financial reports and others.
2. Enables many firms to work in a particular hierarchy by keeping all of their new
shareholders as well as existing shareholders interest.

3. Provide a platform to many companies to working with other countries firms which
further leads in making a target customer base like Hero made a vast customer base in
India(Saunders and Cornett, 2014).
CONCLUSION
By merger and acquisition it enables many organisation to work at the global level. Also
aid them in improving their working style but all of them have to keep a common thing in their
mind which is ethical working pattern. This promote the gathering of wide range of shareholders
so firm can improve their quality of service and products.

REFERENCES
Books and journals
Calvani, T and Alderman, K., 2010. BRIC in the international merger review edifice. Cornell
Int'l LJ. 43. p.73.
Changqi, W and Ningling, X., 2010. Determinants of cross-border merger & acquisition
performance of Chinese enterprises. Procedia-Social and Behavioral Sciences. 2(5). pp.6896-
6905.
Cooper, C.L and Finkelstein, S. eds., 2014. Advances in mergers and acquisitions. Emerald
Group Publishing.
Ferris, S.P., Jayaraman, N and Sabherwal, S., 2013. CEO overconfidence and international
merger and acquisition activity. Journal of Financial and Quantitative Analysis. 48(01). pp.137-
164.
Gugler, K., Mueller, D.C and Weichselbaumer, M., 2012. The determinants of merger waves: An
international perspective. International Journal of Industrial Organization. 30(1). pp.1-15.
Halkos, G.E and Tzeremes, N.G., 2013. Estimating the degree of operating efficiency gains from
a potential bank merger and acquisition: A DEA bootstrapped approach. Journal of Banking &
Finance. 37(5). pp.1658-1668.
Holburn, G.L and Vanden Bergh, R.G., 2014. Integrated market and nonmarket strategies:
Political campaign contributions around merger and acquisition events in the energy sector.
Strategic Management Journal. 35(3). pp.450-460.
Mahesh, R and Prasad, D., 2012. Post merger and acquisition financial performance analysis: A
case study of select Indian airline companies. International Journal of Engineering, Management
& Sciences. 3(3). pp.362-369.
Marks, M.L and Mirvis, P.H., 2011. Merge ahead: A research agenda to increase merger and
acquisition success. Journal of business and psychology. 26(2). pp.161-168.
Phillips, G.M and Zhdanov, A., 2013. R&D and the Incentives from Merger and Acquisition
Activity. Review of Financial Studies. 26(1). pp.34-78.
Sarala, R.M and Vaara, E., 2010. Cultural differences, convergence, and crossvergence as
explanations of knowledge transfer in international acquisitions. Journal of International
Business Studies. 41(8). pp.1365-1390.

Saunders, A and Cornett, M.M., 2014. Financial institutions management. McGraw-Hill
Education,.
Shi, W., Sun, J and Prescott, J.E., 2012. A temporal perspective of merger and acquisition and
strategic alliance initiatives: Review and future direction. Journal of Management. 38(1).
pp.164-209.
Sinha, N., Kaushik, K.P and Chaudhary, T., 2010. Measuring post merger and acquisition
performance: An investigation of select financial sector organizations in India. International
journal of Economics and Finance. 2(4). p.190.
Tarique, I and Schuler, R.S., 2010. Global talent management: Literature review, integrative
framework, and suggestions for further research. Journal of world business. 45(2). pp.122-133.
Vaara, E and Tienari, J., 2011. On the narrative construction of multinational corporations: An
antenarrative analysis of legitimation and resistance in a cross-border merger. Organization
Science. 22(2). pp.370-390.
Weber, Y., Tarba, S.Y and Reichel, A., 2011. A model of the influence of culture on integration
approaches and international mergers and acquisitions performance. International Studies of
Management & Organization. 41(3). pp.9-24.
Zhang, J., Zhou, C and Ebbers, H., 2011. Completion of Chinese overseas acquisitions:
Institutional perspectives and evidence. International Business Review. 20(2). pp.226-238.
Online
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