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Mergers and Takeovers

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Introduction

´╗┐What makes a merger and takeover successful? Research indicates that 65% of mergers and takeovers fail to benefit shareholders. The other 35% of mergers and takeovers are successful. A merger is the combining of two or more companies and is usually mutual between both firms. A takeover is when a company purchases a majority interest in another company; these can either be friendly or un-friendly. M&T?s usually occur when two companies believe a synergist can be made, this means that both companies believe that by coming together they are worth more and are able to gain a bigger advantage than by themselves. More reasons why companies want to come together would be economies of scale, this could be by getting rid of duplicate departments. Some companies may use this as an alternative to hiring as there will be employees already trained and ready to work. An example of a successful M&T would be Morrison?s takeover of Safeway. An example of an unsuccessful takeover would be when G4S tried to takeover Danish competitor ISS. ...read more.

Middle

When an M&T is occurring there needs to be good communication between employees as if there is no communication this will cause speculation between the employees and therefore loss of trust in management teams, also un-motivated staff thinking that they are going to lose their job, this can lead to a decrease in turnover. Overall when two companies come together there is a culture clash and different people and companies do things different ways and they cannot come to an agreement or when they do a grudge is still held. All of these reasons above will lead towards an unsuccessful merger or takeover and this can therefore affect the benefits to the shareholder. This is because all of those reasons above effect the value of the synergy the companies have together and they do not reach expectations therefore decreasing the values of the shares that shareholders have. The other 35% of M&T are successful and there are certain reasons for this. A successful M&T has a new entity about the company. ...read more.

Conclusion

As M&T?s are often rare, unique events the successful companies will learn as they go and make changes fast. As these things don?t happen often a company needs to keep track of everything that is happening and what is and is not working and if something is not working they need to change it fast to keep everything moving smoothly and both parties happy. In conclusion only a few M&T?s are successful because they are so rare for some companies and they have no past experiences to work off. Those that are follow certain steps to an extent. They base the M&T on an increase on revenue, they resolve power and people issues quickly, start to integrate with the other company as soon as the deal is agreed, commit to a new different culture, over-communicate so that no one is in the dark to any situations and set out a plan for the synergy to achieve. Doing most of these steps will lead to a successful M&T, however there can be luck involved with these sort of deals along with missing out key steps this shows how complicated a successful M&T can be and how only 35% of them actually succeed. ...read more.

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