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Success factors of international Mergers & Acquisitions

The success of international mergers and acquisitions is dependent on more than the financial evaluation of the organisations involved

Essay 2010 19 Pages

Business economics - Economic Policy

Excerpt

Table of Contents

List of Illustrations

List of Abbreviations

1. Introduction

2. Classification and Definition of Terms
2.1 Merger
2.2 Acquisition
2.3 Economical relevance of international M&A
2.4 Expected vs. Realised Benefit

3. Critical Factors of Success for M&As
3.1 General Considerations and Chosen Approach
3.2 Management and Leadership in International M&As
3.3 Demands on Communication
3.4 Culture, People and Change

4. Conclusion

Bibliography

List of Illustrations

Figure 1 - Value of all M&A transactions in billion US-Dollars between 1990
and 2001 (Thomson Financial Securities Data, cited in (Lucks & Meckl,
2002, p.2) )

Figure 2 - Most important M&A transactions. Own work based on (Vogel, 2002, p.5)

Figure 3 - Cross-border mergers and acquisitions in Billion US-Dollar
(United Nations Conference on Trade and Development, cited in
(Krüger, 2004, p.48))

Figure 4 - Strategic transaction goals (Meijnders & Schlaepfer, 2009, p.12)

Figure 5 - Successful communication of integration goals (Meijnders &
Schlaepfer, 2009, p.17)

Figure 6 - Lack of employee commitment is the biggest barrier to integration
(Habeck et al., 2000, p.105)

List of Abbreviations

illustration not visible in this excerpt

1 Introduction

The history of mankind is marked by the striving of a person to surpass oneself.In the early days growth was mainly achieved by enlarging the own family, and during the times of sedentarisation growth was achieved by claiming more areas of arable land. These two human characteristics have survived to the present day and have been transferred into modern world economy – on the one hand striving for more and on the other hand the increase of own power or influence. Nowadays those men are called entrepreneurs, and they take care of these things in the economic world through Mergers and Acquisitions.

Therefore, it is hardly surprising that this kind of enterprise growth has found more and more approval in the course of the last years. It is easy to recognize that development by comparing the impressively increasing transaction volumes (see Figure 1).

illustration not visible in this excerpt

Figure 1 - Value of all M&A transactions in billion US-Dollars between 1990 and 2001
(Thomson Financial Securities Data, cited in (Lucks & Meckl, 2002, p.2) )

That this trend will obviously continue has been confirmed by one of the most recent surveys conducted by the Boston Consulting Group (Kronimus et al., 2009). According to the survey every fifth company in Europe plans an acquisition in the year 2010 –in spite of the continuing economic crisis.

These figures look impressive, but if one gets deeper into the subject, one realises that almost 70% of these mergers do not achieve the intended objectives (Palmer, n.d.), or are even regarded as a complete failure(Habeck et al., 2000).Remarkable is the fact that there are even unsuccessful mergers involving financially sound companies. Therefore, it can be concluded that the success of a merger or a takeover not only depends on the financial evaluation of the involved organisations but rather that there must be other factors which play a significant role. These other factors will be identified in this paper and their importance will be critically discussed.

Personal experience

To increase the practical relevance of this work, I’m going to include my personal M&A-experience as an employee. My company was founded by the merger of four financially healthy, mutually independent IT service provider companies. One of the reasons for the merger was that their portfolios complemented each other very well. At that time I had been working there for seven years. Later on we bought an Austria-based software company and lastlyanother Germany-based company which has a branch located in Switzerland. The company currently has offices in three countries, approximately 650 employees and achievesan annual turnover of approximately € 70 million.

2 Classification and Definition of Terms

In order to create a common understanding of terms it is necessary to introduce and define the core terms and concepts and the way they are interpreted within the scope of this work.

Thus, for example according to Wirtz there isno universal definition for the two terms "merger" and "acquisition" yet, since both terms are often used in science and practice synonymously with a variety of other terms like "corporate acquisition", "concentration", "fusion", "takeover", “union” or "strategic alliance"(2003).As stated by Zwahlen this is due to the fact that the people involved in an M&A are coming from very different scientific disciplines[1] (1994). An initial classification can be done with the following figure[2]:

illustration not visible in this excerpt

Figure 2- Most important M&A transactions. Own work based on (Vogel, 2002, p.5)

In the opinion of Lucks &Meckl the fundamentally important thing is that from the management point of view it has to be a strategic measure that allows the companies to influence corporate policy –no matter whether it is an acquisition or a merger(2002).Nevertheless they point out that these terms are associated with very different values and emotions in the public eye and especially from the perspective of the workforce, which in turn has a direct impact on the M&A success. But these implications get only transparent and understandable when the terms are explained.

[...]


[1]For example there are lawyers, investment bankers, consultants, and support staff involved in an acquisition. The way the terms are interpreted among the involved occupational groups varies widely. ’(Zwahlen, 1994, p.21)

[2] The dashed area is not subject to this task. But in the case of a contractual cooperation Vogelassumes it as equal and counts them to the M&Aarea (2002). It has been listed here for the sake of completeness. For further information see also (Schwaab, 2003).

Details

Pages
19
Year
2010
ISBN (eBook)
9783640698011
ISBN (Book)
9783640698288
File size
1.3 MB
Language
English
Catalog Number
v155786
Institution / College
University of Kent – Kent Business School
Grade
1,7
Tags
M&A international M&A success factors of international M&A Fusion Acquisition Mergers and Acquisitions Management and Leadership

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Title: Success factors of international Mergers & Acquisitions