Merger and Acquisition: Factors, Performance, and Regulatory Aspects

This report provides an analysis of mergers and acquisitions (M&A), drawing on several academic articles. It explores the primary motivations behind M&A, emphasizing growth, synergy, and diversification, and examines the perspectives of both buyers and sellers. The report highlights the importance of both internal and external growth strategies, particularly how M&A can facilitate quicker market expansion and geographical reach. It also investigates the psychological impact of M&A on employees, stressing the need to address stress and cultural compatibility issues to ensure successful integration. Furthermore, the report delves into the regulatory environment, especially after the 2008-09 global financial crisis, and discusses the 'failing firm' argument in merger control. The analysis includes an examination of post-merger performance in the Chinese pharmaceutical industry and the importance of effective integration and favorable legal environments. Overall, the report underscores the complexity of M&A transactions, emphasizing the need for strategic planning, employee well-being, and regulatory compliance.

Running head: MERGER AND ACQUISITION
Merger and Acquisition
Name of the Student
Name of the University
Author Note

1MERGER AND ACQUISITION
Duksaite, E. (2009). Why companies decide to participate in mergers and acquisition
transactions. Mokslas: Lietuvos Ateitis, 1(3), 21.
In this article, the authors discuss about the reasons for companies participating in merger
and acquisition transactions. The major motivating factor is growth. Mergers and
acquisitions allow company to expand their growth and reach wider markets than before.
This also happens in a shorter time span than the company expanding by itself. Other
important factors include synergy and diversification. However, these factors are a mere
extension of the growth motive that continues to be a major factor in the expansion of the
business. It also contains the perspective of both the buyer and the seller in a merger
transaction. The article suggests that there are two options available for an option to
grow. They are the internal/organic growth and the inorganic growth. The inorganic
growth occurs through mergers and acquisitions. In case of a company looking to grow in
its own industry, merger is the best option. Especially for companies looking to expand in
a short span of time. It is also helpful for companies looking to expand into new
geographical regions as it provides competitive advantage to the entities. The next reason
provided by the authors for entering merger and acquisition transactions is synergy. In
financial terms, synergy refers to the combination of entities becoming more powerful
than the individual entities do. They are the operating synergy and the financial synergy.
Operating energy states that an entity obtains both economies of scope and economies of
scale by entering into a merger. Financial synergy refers to the overall reduction in the
costs incurred by the company. It also provides tax benefits, access to intangible assets
and access to a new customer base to an entity.

2MERGER AND ACQUISITION
Cartwright, S., & Cooper, C. L. (1993). The psychological impact of merger and acquisition
on the individual: A study of building society managers. Human relations, 46(3),
327-347.
This article suggests that companies tend to enter into merger and acquisition transactions
despite having knowledge about the risks involved in the transactions. This is because
most entities have found growth through mergers and acquisitions to be more appealing
than relying only on organic growth. However, the impact of a merger on the health of
the employees has been mostly ignored by most of the companies. A research by the
authors suggests that a merger is extremely stressful and involves a lot of cultural
compatibility between organisations. The research was undertaken on the Gable and
Apex merger. The author suggests that the merger was a success because both the entities
were culturally and strategically well-matched. However, a lot of health issues were
found amongst the middle managers of both the entities entering into a merger. Hence,
the article suggests that merger related stress and pressures should be appropriately
identified by an entity and steps should be taken towards reducing the same. These will
help in making the merger more successful and effective. The profit making aspect of the
business will also be served due to these steps of the entity.
Poddar, D., & Marshall, J. (2010). Merger control during the GFC, systemic risk issues and
failing banks. JASSA, (2), 11.
This article deals with the competition aspect of a merger. It suggests that after the global
financial crisis of 2008-09, obtaining permissions for mergers and acquisitions has
become extremely difficult. The main reasons for the rejections are the concerns about
competition and financial consolidation in an industry. Hence, the authors look at an

3MERGER AND ACQUISITION
alternative way of obtaining permission for a merger. They suggest that a merger should
be approved if the companies are able to prove that without the merger, the entities would
fail and not be a part of the market anymore. Their exit from the market results in a
decrease in the competition existing in the market. Emphasis is laid on the regulatory
environment prevalent in Australia, China and the US. In the US, recent developments in
the law suggest that if an entity was facing financial ruin, then it should be allowed to be
a part of a merger rather than exit the market completely. Guidelines were provided to
identify a flailing firm and on how to differ it from a failing firm. Rather than completely
focusing on the profitability aspect of a merger, focus should be laid on the necessity of
the merger and the benefit from it to the industry as a whole. While regulating
compliance is necessary, it should not result in damaging the industry in a country. It also
acknowledges that the flailing firm argument can be extensively used in the modern day
business environment. Hence, more care should be taken in allowing a merger to take
place.
Wang, X., & Ge, S. (2014). A Study on Merger & Acquisition Performance in Chinese
Pharmaceutical Listed Companies. Management & Engineering, (17), 71.
This paper aims to measure the financial performance of the Chinese pharmaceutical
companies after a merger between the years 2007 and 2012. It suggests that the main
benefit of the merger was the immediate improvement in the performance of the entities
after the merger. While the performance also gradually declined after some time, the
overall performance of the entities was much better than it was before the merger and
acquisition. The measurement of the performance took place through factor analysis.
Hence, the main observation of this paper was that merger and acquisitions were

4MERGER AND ACQUISITION
beneficial for the Chinese pharmaceutical industry as a whole. It also states that the
emphasis should be laid on improving the post-merger integration to improve the overall
results of a merger. More emphasis should be laid on improving the legal environment of
the country as well. The author suggests that the legal system in China is not as
developed as in the case of other Western countries. The government regulation should
also be reduced in the country to improve the effectiveness of the mergers. It also lays a
lot of emphasis on the post-merger integration in improving the long run results of the
merger.