Merger is a tool used for the purpose to expand the operations as to increase profitability. Mergers occur by mutual consent setting between executives on both sides. Acquisitions can happen through a hostile approach by the majority purchasing shares against the desire of the target’s board of directors. Mergers and acquisitions fail in many reasons. This assignment will compare and contrast mergers and acquisitions failures and recommend a form of corporate restructuring. This assignment also will consider what will happen to the stakeholders, market share, company assets, and goodwill.
Why Mergers and Acquisitions Fail
The five main factors of why mergers and acquisitions fail are flawed business logic, misunderstanding of the new business, improper deal management, awry integration management, and askew corporate development. The first factor – flawed business logic – is one of the most important factors in merger and acquisition. Mergers and acquisitions are a high-risk strategy and companies should make decisions based on the company’s health. An acquirer should have a strategy to add values to the target firm. The acquirer should make sure the target firm fits the buyer’s strategy, operation, and distribution channels. The second factor – misunderstanding of the new business – indicate that an executive must know the overall business between both companies. Most companies do not take the time and money to invest in the target company. Buyers must invest necessary time and money to ensure the chosen company will generate returns. The acquirer company must understand how the target firm makes money. If the buyer understands the target firm, then the acquirer can assess integration benefits. The third factor – improper deal management – is a mistake most companies makes after a merger and acquisition. Companies fail to manage the deal effectively causing a fatal result. A buyer is willingly to pay what the company is worth. The buyer needs a realistic valuation because of escalating prices. Negotiation can halt before executives can finalize the deal. The integration plan should be prepared as a valuation and allow rapid action. The fourth factor – awry integration management – requires managers to be focus and determine to complete the plan with an efficient and timely manner to meet the goals of the company. The acquisition team must plan the days, weeks, and months so the integration plan to succeed. The manager must be clear, rapid, and consistent with communication without the hype and empty promises. The team requires clear, strong leadership in order to make the plan endure. The final factor – askew corporate development – should always follow with direct leadership in that gives the guideline of the cultural differences between the two companies. After many days in establishing control, the team should come with detailed, tedious work to realize the benefits of the acquisition. The two companies must become one new organization with a common direction. Cultural differences should be addressed or the team will not work and problems will occur. If managers spend time in other areas, then someone should coordinate the core business (Rankine, 2014).
M&A Occurs The stakeholders consist of many people who impacted by an action in the company. The stakeholders are shareholders, management, employees, and customers. Stakeholders are winners if shares have no prospect of rising. Shareholders sell their shares and seek other profitable opportunities. The shareholders must deal with the liabilities when a company takes over. The higher the debt, the less capital the shareholders have in their equity. The stakeholders must adjust to the acquisition so that each one of them can put a perspective on the new company. The stakeholders must put the company first and decide on the best action for the company to move forward and succeed. In order for the company to move forward, new management must layoff or demote