Mergers and acquisitions may bring significant financial benefits if all goes well, but result in financial losses and a less productive workforce if they do not work as planned. Mergers and acquisitions can help companies tap into new markets, cut down on the costs of research and development and expedite growth. However, they may be costly to implement and lead to reduced worker productivity and failure to meet stakeholder expectations.Know More
Mergers and acquisitions, like most corporate transactions, may be beneficial or harmful. Mergers are best evaluated on a case-by-case basis. They may be performed either to benefit the public or just top-level executives and shareholders: The underlying motive ultimately determines the success of the merger and the overall reputation of the resulting organization. Mergers may produce significant benefits, primarily in the areas of business growth, exposure and economic gain. Mergers may expose firms to larger networks, and in turn help to grow business. When companies combine resources, including finances and personnel, they are often better equipped to conduct research and development. However, they may also result in job losses, inflate prices for certain items and reduce consumer choices for certain products. Acquisitions, likewise, carry risks and benefits. They may help companies grow quickly and build a strong market presence. However, they may produce financial fallout, be expensive to carry out and produce integration problems between the two combining organizations.
When it comes to surviving in the business world, growth and visibility are paramount for success. When a merger goes as planned, the two joining companies combine to create a more powerful and efficient organization than either could achieve on its own. Successful mergers also allow firms to realize greater profits and, in turn, dedicate more funds and personnel for conducting research and development. Another potential advantage of mergers is that they can build impressive economies of scale: This is particularly true in the case of horizontal mergers. Finally, mergers can limit duplicated efforts by eliminating market competition between two previously competitive organizations and enable market regulation. But, as with other financial activities, mergers carry risks too. They may leave consumers with fewer choices for products, cut jobs for employees, and create diseconomies of scale.
Acquisitions, like mergers, may create significant benefits when all goes well. However, they carry significant risks too. Organizations are often drawn to the concept of acquisition because it is one of the most time-efficient growth strategies. Successful acquisitions allow firms to gain instant access to resources and knowledge they previously lacked. Simultaneously, they gain immediate exposure to new product markets, a larger existing consumer base and the opportunity to reach a wider target audience while cutting down on risks and financial costs of new product development. Acquisitions may also help companies meet and even exceed stakeholder expectations. When facing pressure to meet certain expectations for returns and sales, acquisitions can help reach those goals much faster. Lastly, acquisitions may remove market barriers, and save companies the time and financial resources required for tapping into new markets. Acquisitions, however, may produce consequences too. They may lead to financial fallout due to disruption of work flow and higher than anticipated cost of acquisition and create a less productive workforce if employees resent the acquisition and fail to see eye-to-eye.Learn more about Corporations
As of 2014, Sears Holdings, which owns and operates Kmart and Sears retail stores, has closed over 200 Kmart and Sears locations due to increasing financial losses as a result of declining sales figures. The two retailers have struggled in recent years to stay competitive with other major retail chains.Full Answer >
A vertical merger involves companies at different stages of production, and recent examples of such mergers include the 2008 acquisition of Tele Atlas by its fellow Dutch firm, TomTom and the merger between Google and Double-Click. At the time of acquisition, TomTom was the world's largest manufacturer of car navigation systems, and the company wanted to use Tele Atlas' digital map data to provide real-time updates to its sat-nav systems.Full Answer >
Firms undertake mergers and acquisitions to create larger companies, maximize shareholder value and strengthen the financial position of the company, according to Investopedia. These deals also bolster the purchasing power of the acquiring company.Full Answer >
The disadvantages of transnational corporations include job insecurity, environmental degradation, poor working conditions and the risk of outsourcing. The arrival of transnational corporations to new areas is generally met with enthusiasm, but there are downsides to having multinational corporations expand into new territories too. From exploitation of natural resources to market domination, there are several consequences of business expansion around the globe.Full Answer >