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Mergers and acquisitions can be value creators or value destroyers

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Introduction

(a) "Mergers and acquisitions can be value creators or value destroyers" Discuss the above statement using relevant empirical evidence. Corporate mergers happen when two companies combine. There are two situations in merging. An agreed merger is when both companies want to merge and when one company seeks to control another company without its agreement, it is called a hostile takeover. It is up to the shareholders of the target company to approve a merger. They usually approve if it is recommended by the board, or if they stand to make a substantial profit from the shares in the new company. Mergers happen since there are many motivations such as expansion. A larger, growing company may try to take over its smaller rivals in order to grow bigger. In some cases it is the smaller company that wants to expand, but is held back by lack of capital. Smaller companies seek a larger partner who will put in the necessary investment. When a stock market booms, it makes mergers more appealing because it is relatively cheap to attain other companies by paying for them in high valued shares. However, falling share prices can lead to a company being undervalued and thereby an attractive acquisition. Mergers can fail when the merged companies cannot agree on existing or new terms. Mergers can also run into regulatory problems. Governments may be concerned that the merger might create a monopoly and can either block it or require the merged companies to sell some of the firms which are part of their business. Mergers can sometimes not deliver the strategic objectives set, such as cost savings failing to materialise. There have been varied studies that suggest that whatever the instant benefit to shareholders, mergers rarely give much added value to the economy as a whole. Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market in opposition to the wishes of the target's board. ...read more.

Middle

They argue that extreme performance (both good and poor) is fundamentally driven by the quality of management not by the dynamics of an industry and that exceptional management produces exceptional performance, and poor management produces poor performance. Daimler- Benz merger between Mercedes with Fokker and Dasa amounts of money trying to buy companies at the front position of technology only to crash into a high tech depression in 2001 which resulted in them losing 98 percent of their share value. Chairman J�rgen E. Schrempp resigned from his position at the end of 2005 as head of the world's fifth largest auto manufacturer. In an agreement with the board of directors and Schrempp, he terminated his employment with the company early (his contract ran through 2008). Schrempp has been blamed for the fall of the company's share price since Daimler-Benz's merger with Chrysler Corporation in 1998 of which he was the architect. DaimlerChrysler once held a large stake in the Japanese car company Mitsubishi Motors as well as the car operations of Korean manufacturer Hyundai. Its stake in Mitsubishi was as high as 37% but since it did not participate in a new capital increase in April 2004, it was reduced to 22%. The company sold the last of its Mitsubishi stock to Goldman Sachs in November 2005(see www.daimlerchrysler.com) (b) Choose a listed company that has merged in recent years and assess whether or not the company has succeeded or failed to meet the strategic objectives for merging. BP AMOCO ACOR CASTROL - Helios BP has long been a major part of the world's oil and petrochemicals industry. Our history goes back to just one man - William Knox D'Arcy - who invested time, money and labour in realising his conviction that Persia (now Iran) held extensive oil deposits. Today, BP has a major world-wide presence - it is one of the world's three largest oil companies and one of the six or seven largest companies in the world. ...read more.

Conclusion

BP Amoco's objective is to be leaders of oil companies in green design and they seek to produce a profitable business market and a competitive advantage. While it should be noted that BP Amoco still generates 98.5% of its income from oil and fossil fuels, the effort to implement green design shows a potential market of environmentally aware customers and BP Amoco's efforts to capture it. Market research and customer analysis have given them the necessary information to make profitable business decisions. BP's tie-up with its United States rival Amoco was supposed to create an ethical champion at the top of the global oil industry and it was one of the biggest mergers in history. But eight years on, BP's US arm is becoming America's most accident-prone business. Issues are being raised about whether BP took a firm enough grip on its US management after mergers with Amoco in 1998 and Arco in 2000. BP's spokesman says its commitment to renewable energy is unchanged. The company has invested heavily in solar and wind power, while a carbon impounding project is under way in California to generate electricity from petroleum coke. There have been doubts about BP that runs deep in America and the company may never bring back the optimism inspired by its environmentally aware change. Pratap Chatterjee, director of California-based CorpWatch, says: "This is a company that says it cares about the community and society, but it's not repairing its own pipelines and refineries." � After performing a brief market segmentation analysis, the Kano Technique can help identify and prioritize green design business strategies (Finster et. al. 2002). Reference: Websites Annual reviews http://www.bp.com/liveassets/bp_internet/annual_review/annual_review_2005/STAGING/local_assets/downloads_pdfs/b/bp_ara_2005_annual_review.pdf http://investor.accenture.com/phoenix.zhtml?c=129731&p=irol-irhome http://www.bp.com/sectiongenericarticle.do?categoryId=9007082&contentId=7014216 Strategy Business - http://www.strategy-business.com Articles and journals http://www.mbadepot.com/external_link.php?ID=1282&db_table=links&url=http%3A%2F%2Fknowledge.insead.edu%2Fabstract.cfm%3Fct%3D8858 http://www.corporateaffiliations.com/Executable/cn_mergers.asp?begins=B&submit=View+Archived+Mergers http://today.reuters.com/news/articleinvesting.aspx?type=mergersNews&storyID=2006-12-04T035524Z_01_SP78341_RTRIDST_0_MERGERS-DEALS.XML https://web.lexis-nexis.com/universe http://www.tutor2u.net/business/strategy/competitor_analysis.htm Books Mergers: Leadership, Performance and Corporate Health, Maurizio ZOLLO, David G. Fubini, Colin Price, Palgrave Macmillan Sharon Beder, 'BP: Beyond Petroleum?' in Battling Big Business: Countering greenwash, infiltration and other forms of corporate bullying, edited by Eveline Lubbers, Green Books, Devon, UK, 2002, pp. 26-32. ?? ?? ?? ?? ...read more.

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