Mergers And Acquisitions Current Industry Scenario Management Essay

Mergers And learnednesss Current sedulousness Scenario Management EssayThe previous chapter had apportionn us an insight of the interrogation that would be conducted providing an introduction to it. A brief discussion was done by the tec regarding the research and the possible publications of the research.In this chapter we would be discussing the relevant books that would be used by the investigator to conduct this study. It would also give us few insights closely the real world scenarios with regard to Mergers and Acquisitions. The delineate factors that would give achievement in parapraxis of a Merger/Acquisition atomic number 18 discussed. Fin each(prenominal)y, this chapter concludes with a summary of the key points made throughout the chapter.To take over the research title is What are the repercussions of mergers and acquisitions do they offer competitive favour is the advantage harbourable? A review on GE from 2005 to 2010.The taper of this research is to crit ically evaluate the con ages of mergers and acquisitions on the extent to which it abide elicit to be beneficial for an physical composition and how well can an organization repair accustomed to the competitive advantages from mergers and acquisitions? based on a review of public Electronics from 2005-2010. In meeting this aim, the following Objectives were setTo critically observe the methods and procedures followed by organizations for mergers or acquisition to happenTo critically examine if the motivating methods occupied by worldwide galvanizing Compevery protagonist to yield more than(prenominal) output in a merger and acquisition, 2005 to 2010To assess the scope, these mergers and acquisitions contributed towards change magnitude two the top line and bottom line festering in General voltaic Company, 2005 to 2010To critically observe the methods and strategies that General Electric Company followed to sustain their growth and development obtained from the merger or acquisition, 2005 to 2010To identify the areas of integrating in an organization that most need improvement and to resolve the problemsMergers Acquisitions Current exertion ScenarioThe current industry scenario as furthest as Mergers Acquisitions (MA) are bear on is more of an act of showing power by the troupe thrust for the merger or putsch. No one is happy as far as a merger or an acquisition is concerned diametrical than the order which is taking over. A MA normally leads to various module issues, the close of an organization goes through a complete mixed bag and this win over becomes hard to be accepted by the existing staff members of the company which is being interpreted over. We throw off seen legion(predicate) scenarios wherein the staffs of the company being interpreted over have had to either undergo a huge change or leave the organization itself. But, the scenario is always non the same on that point have been instances wherein the company taking over have come antecedent to help the existing staff members in the old organization to pop off in the new system which they are not used to. umpteen companies have made it to the top of their respective industry because of such MAs.In the instance of the most recent coup of Cadbury by Kraft Foods, some(prenominal) the companies have been known for their bitter rivalry in the industry. But at the end of all this rivalry the bill of fare of Cadburys agreed to bow consume for 11.5 billion pounds in January 2011. The Chairman of Cadbury Mr.Roger Carr in an interview with BBC was quoted to say that the suit for which Cadbury agreed for the putsch was more in the financial interest of the company. This all the way shows that any kind of merger would just be done on the basis of the financial ability of the company to handle the pressure. Cadbury a company known for its best HR practices had to give away its culture and its practices to a company like Kraft foods which the moment they took over Cadburys, just started substitute the existing staffs with their own staff. This is the kind of attitude that saw many unload their jobs. There were many who were made to leave their jobs by showing the culture of an American company to the British workers. Cadbury was known to take care of its workers and when the takeover was completed it was just cleaned over by Kraft Foods just in the way they wanted.This is not only for Cadbury, this is normally what happens in any takeover and Kraft-Cadbury is just an workout of what has been happening around. But, there have been few takeovers which faculty also consequence in the growth of the bond. The example for this can be the General Electric Company (GE) takeover of Lineage Power Holdings, Inc., from the Gores Group, LLC. This takeover which happened in March 2011 resulted in the growth of Lineage Power Holdings Inc., in the field of telecommunications and data communication. Though the company was taken over by GE the company still stuck to its culture and none of its staff have been asked to leave by GE. This showed GEs attitude towards its employees even if it meant that it was a company that they had taken over. This attitude of GE shows how a company should handle such acquisitions in a smooth manner without affecting the employees.Though the current scenario gives us a different picture about Mergers Acquisitions it is rattling important that companies do not take decisions based on the current scenario alone. That is where it becomes important for an organization to do ample research before proceeding for an Acquisition or a Merger. There are number of theories that suggest different kinds of approaches to be taken with regard to a MA. The reviews of the literature on these theories are discussed by the researcher further in this chapter.Mergers Acquisitions smorgasbordThe potpourris based on the minutes can be done as even, Vertical or gather (Gaughan, 2002, Chunlai subgenus Chen and Findlay, 2003). As stated by Chunlai Chen and Findlay (2003), horizontal MA is where the prey and the acquiring company are in the same industry. The example for such a merger was discussed earlier when the researcher spoke about Kraft Foods takeover of Cadbury. This is largely cod to the fact that there has been upstanding change in the technology and liberalization of industries. MA are give tongue to to be classified as vertical when there is a gang of firms which were already in a client supplier or a buyer seller relationship. The organizations that are involved in such legal proceeding normally look at downsizing the monetary values in the honor chain and eventually benefit the economics of scope (Chunlai Chen and Findlay, 2003). As stated by Gaughan (2002), a transaction that involves two companies which operate exclusively un related to business is called Conglomerate.In addition to the above MA can also be classified as either Friendly or belligerent ( Chunlai Chen and Findlay, 2003). A transaction is considered as Friendly if the scratch companys board agrees to the takeover amount and the MA is carried out. If the takeover happens with the gull companys board just needing to surrender to the acquiring company just for the money, it is considered as Hostile.Chunlai Chen and Findlay (2003) also stated that the MA could be Domestic or Cross-Border for the companies that are involved. This is normally done in order to create a battlefront or to look at having better opportunities for success in the Industry.The classification of MA could then be summarized in the table belowClassification of merger acquisition transactionsMA classification in toll ofValue chainRelationshipEconomic areaHorizontal MAVertical MAConglomerate MAFriendly MAHostile MADomestic MACross-border MATaking into account the different classifications in terms of Value Chain, Relationship and Economic Scope the researcher would be considering the different MAs that have been put to death by General Electric Company (GE) and look at the effect that such MAs have had upon the employees of the target organization. The researcher further looks at the various theories that would have been considered for different MAs executed by GE.Motives and the Theories behind Mergers AcquisitionsExploring the motives of firms engaging in MA transactions has been pose with a significant amount of efforts by different authors. Earlier Trautwein (1990) and more recently Cox (2006) provided us with a more brief rendering of the motives by underlaying different theories (Please disturb to Table 2.2 MA Motives). Trautwein(1990) noted that MA makers were more interested in the valuation (the commode yielding a high Net Present Value) and synergy to justify the merger or acquisition. As expected it is quite clear that managers do not refer monopoly power in any of the benefits that the acquiring organization might be deriving out of the deal. Trautwein (199 0) also states that the process and the raider theories have very little evidence on the motives implied by them both(prenominal) in the prepare of research or in practice. The disturbance surmisal is also discussed by him as being considered at the macro-economic level than the micro-economic level which is more related to the present research and hence the researcher has not considered the same. Interestingly, Gaughan (2002) gives a more realistic way of viewing the MA motives with numerous empirical graphic symbol studies which has reference to the theories with more details. There are four main motives for a firm to execute MA according to him, they are(1) Quick growth comes through M&A(2) Economics of scope or outmatch may be gained through M&A(3) Having a larger firm due to a MA means more approach to capital market, which would in the future lead to a lesser cost of capital, i.e., benefits of more financial options and(4) A firm with superior management readiness migh t also look at MA with an anticipation of higher gains through the target organizations business.One the whole, the researcher quite clearly shows how all the trine authors noted above have concurred on the fact that any MA is driven by not one but many complex motives. And all these are not at all exchangeable in any form and would always vary from deal to deal which can never be justified with a superstar theory/approach.Merger acquisition motives (adapted from Trautwein, 1990 and Cox, 2006)MotivesTheoryDescriptionRational Choice MAMA Benefitting Acquirers ShareholdersGainingBased on synergyEfficiencyTheoryThe leash major synergies Financial, Managerial and Operational are achieved when MA is executed.Transfer of wealthiness from customersMonopoly theoryMarket power is seized by planning and executing MA. Horizontal Conglomerate MA types wherein the acquiring firm takes control of the industry on the whole.Transfer of Wealth fromtargetsshareholdersRaider theoryA person w ho oversees and initiates wealth transfers from the stockholders of the companies he bids for exchange of excessive compensation after a booming takeover is called a Raider.Gaining based on privateinformation valuation Theory/ Investment TheoryThis kind of MA is normally intend and executed by managers who have in-depth knowledge about the market of the target company.MA Benefitting ManagersEmpire- building theory/Agency theoryInstead of increasing the shareholders value, MA is planned and executed to maximize the Managers own utility.Process proceeds MAProcess theoryMAs are executed as an outcome of another process as per this theory. These processes can be internal or external to the organization.Macro-Economic Phenomenon MADisturbance theoryThe MA which is triggered by uprightness of an economic disturbance forms the Disturbance theory. These are normally those MAs which are not that successful when it comes to long term as they are a result of an economic imbalance.The su ccessful Acquisition-Integration strategy of General Electric Company A PreviewThe case study that has been taken for this research is that of General Electric Company, a name which has been very successful in Mergers Acquisitions mostly due to its strategy techniques. The most successful strategy as far as GE is concerned is the Wheel of Fortune The scout gravel of GE capital. The whole cycle of the integration of both companies as a single entity involves a lot of involvement from both the sides.The most discussed acquisition-integration process is that of the GE Capital Services Wheel of Fortune flummox coded as the Pathfinder Model. This model is now well established and has been successfully implemented by GE in all its acquisitions.This model consists of four main power points called implement Stages viz. Pre-Acquisition, Foundation Building, Rapid Integration and concentration. It starts from when the deal is initiated to the stage where the integration is completed. The four stages are further divided into two or three more processes within each stage. The Pre-Acquisition stage has processes like Due Diligence, negotiation and Announcement, Closing and Signing off of Deal. The Foundation Building stage consists of the cast of the integration, the acquisition -integration workout and the strategy formulation. The Rapid Integration consists of two processes instruction execution of strategy and Course Assessment and Adjustment. The last and final stage is Assimilation wherein you have the long-term evaluation and Adjustment and then the Capitalization of the success of the integration of both organizations. Also in each action stage several best practises which are more specific and practical to help the managers to support the integration process.WOF-GE.jpgThe Wheel of Fortune The Pathfinder ModelThis model clearly shows that the acquisition integration is in itself an art which can be also a science when it comes to principles followed by th is model. A particular sequence of actions which are leveraged according to the requirement of the acquisition-integration process is clearly defined in the Pathfinder model, most of which are more unique in nature.The model is shown with such representation that it does not eliminate the need for managers to improvise for the integration process but it however prevents this improvisation to become a boil down point in the integration process.This is the model that has been successfully implemented by GE time and again and has always paid them rich dividends when it comes to both organization and staff integration, which is very important for the integrated organization to succeed in the current market situation.ConclusionIn the above chapter the researcher has given the insights on the current scenario with regard to the Mergers Acquisitions. The researcher also ventures into the different theories with regard to Mergers and Acquisitions and explains with the help of necessary l iterature the concepts surrounding these theories. Also the researcher identifies the various scenarios in which these theories are to be used in a merger or acquisition. The researcher further gives information about the cause why GE has been chosen for this research as a case study by emphasising the fact that most of the acquisitions that have been executed by GE have been successful. The Pathfinder model being followed by GE is explained by the researcher, giving a summary of the acquisition-integration process which has helped GE in smoothening of all acquisitions handled by GE. On the whole this chapter deals with various literatures that detailing the MA processes and gives the researcher a strong idea about the Research methodology to be followed for conducting this research successfully.