Merger and Acquisition Activity
Rachel Hewlett asked:
This article is an enquiry into whether the mergers and acquisitions resorted to by industries and business houses all over the world have been successful or unsuccessful in creating value for the shareholders.
Merger and acquisition activity has been seen as growing at a fast pace in recent times. Mergers and Acquisitions, a development which was seen primarily in the United States at one time, are now turning out to be increasingly popular in other parts of the world. Apparently, Merger and Acquisition activity has turned out to be significant business-level advancement in recent corporate world.
Regardless of all the advantages of mergers and acquisitions and the vital position which it has in nearly every consideration of business strategy, substantiation on the end results of mergers and acquisitions spot towards one apparent conclusion that mergers and acquisitions are not always successful and most of them failed to generate value for shareholders and the acquiring company. Hay Group found that within five years more than 30% of all acquired companies were sold off and that 90 percent of mergers never came up to the acquiring firm’s expectations. One good example of this is the merger of AOL Time Warner, which was announced with great excitement about the “synergy” between new technology and classic content, proved to disappoint on all counts.
Mergers and acquisitions are considered as an important strategic option for business growth in recent times. Even though both are similar in nature, a merger is different from an acquisition. A deal in which two companies consent to incorporate on a comparatively equivalent basis is known as a merger. On the other hand, a deal in which one firm purchases either the majority of the shares or all of another business is known as an acquisition. In the case where the majority of the shares, also called the controlling interest, is acquired, the shares of the acquired company are usually kept as a separate subsidiary or operating unit in the portfolio of the acquirer’s company. Conversely, in the case where whole of a company is acquired, the assets of the purchased company become a part of the overall assets of the acquirer’s firm.
This article is an enquiry into whether the mergers and acquisitions resorted to by industries and business houses all over the world have been successful or unsuccessful in creating value for the shareholders.
Merger and acquisition activity has been seen as growing at a fast pace in recent times. Mergers and Acquisitions, a development which was seen primarily in the United States at one time, are now turning out to be increasingly popular in other parts of the world. Apparently, Merger and Acquisition activity has turned out to be significant business-level advancement in recent corporate world.
Regardless of all the advantages of mergers and acquisitions and the vital position which it has in nearly every consideration of business strategy, substantiation on the end results of mergers and acquisitions spot towards one apparent conclusion that mergers and acquisitions are not always successful and most of them failed to generate value for shareholders and the acquiring company. Hay Group found that within five years more than 30% of all acquired companies were sold off and that 90 percent of mergers never came up to the acquiring firm’s expectations. One good example of this is the merger of AOL Time Warner, which was announced with great excitement about the “synergy” between new technology and classic content, proved to disappoint on all counts.
Mergers and acquisitions are considered as an important strategic option for business growth in recent times. Even though both are similar in nature, a merger is different from an acquisition. A deal in which two companies consent to incorporate on a comparatively equivalent basis is known as a merger. On the other hand, a deal in which one firm purchases either the majority of the shares or all of another business is known as an acquisition. In the case where the majority of the shares, also called the controlling interest, is acquired, the shares of the acquired company are usually kept as a separate subsidiary or operating unit in the portfolio of the acquirer’s company. Conversely, in the case where whole of a company is acquired, the assets of the purchased company become a part of the overall assets of the acquirer’s firm.
