Mergersand acquisition refer to the combinations of organizations. Thedocument emphasizes more on acquisitions than mergers. It is a verycommon case in the US, especially in the 1980s. Some of the companiesthat have been involved are such as AOL when it acquired Time Warner.The Pfizer company also acquired Wyeth (powerpoint). A companywilling to acquire another firm looks for some characteristics in thetarget company so as to ensure that it can it fits its requirements.One of these includes the aspect that its price needs to be lowerregarding the expected price as well as the market price(Reuters.com, 2015). It is also important to acquire such firms sincethey have lower fixed costs and a high market share
Companiesmost often target those firms that are performing poorly. Such arethose who could experience poor management, and it may be necessaryto fire the management soon after the acquisition process is overregarding poor management (Reuters.com, 2015). This is referred to asdisciplinary takeover that is an apt governance mechanism. Whetherthis method is effective at promoting better management is an issuethat is under debate.
Somecompanies that face a potential acquisition stage a defense that aimto prevent them from such an eventuality. Some of the indicators ofthe possibility are through an observed continual drop in the stockvalue of their companies, showing that the company is performingpoorly. This is referred to as a takeover defense.
Ina neoclassical perspective, mergers and takeovers help to promotehigh performance, discipline, profits and efficiency in companies.There is usually the use of natural selection mechanism in which themarket ensures that the market accommodates a company that is wellfitted to survive in the market (powerpoint). This situation alsoshows that weak companies fail to survive in the market. When variousfirms institute a plan to avert a merger and a takeover, it leads toa poor performing firm and a poor performing economy. Herbert Spencer(1865) wrote in the Social Statistics praising the essence ofsurvival for the fittest where he indicates that nature is in chargeof ensuring that a race keeps on growing.
Theneed for mergers is usually motivated by the yearning for economicprowess as opposed to competitive pressures that promote efficiencies(powerpoint). Economic prowess is important since it helps to preventcompetitions and aims for profits at a loss of fundamental nationalinterests. There is, thereby, a need for policies that call foracquisitions to safeguard national interests.
Mergersand takeovers also rely on the application of radical perspectives.This is edged on the aspect that mergers symbolize the flaws thatcome with capitalism. One its characteristics include the unrealisticprediction of profits (DeChesare, DeChesare & DeChesare, 2015).It also indicates the pressures of competition as well as search forcosts that are much lower. Another characteristic is also edged onthe desire to expand markets globally. All the stakeholders also needto remember that if they allow mergers and acquisitions, then it willlead to a demise and crisis within capitalism.
Transnationalcorporations are also faced by a potential for mergers if they failto perform according to the expectations leveled towards them bynational governments (DeChesare, DeChesare & DeChesare, 2015).Some corporations, however, exercise a level of protectionism as aresult of economic crises. This aspect, therefore, hampers theprocess of mergers and acquisitions.
DeChesare,B., DeChesare, B., & DeChesare, B. (2015). Mergers& Inquisitions.Mergers& Inquisitions.Retrieved 29 November 2015, fromhttp://www.mergersandinquisitions.com/
Mergersand acquisition powerpoint slides
Reuters.com,(2015). M&ampA – News, M&amp A Deals andTransactions. Retrieved29 November 2015, from http://www.reuters.com/finance/deals/mergers