Ans) Companies merge for a variety of reasons: expansion of market share, acquisition of new lines of distribution or technology, or reduction of operating costs.The fact that mergers so often fail is not, of itself, a reason for companies to avoid them altogether.
Some of the main risks that may precipitate the failure of an M&A transaction are:
- Integration risk: In many cases, integrating the operations of
two companies proves to be a much more difficult task in practice
than it seemed in theory. This may result in the combined company
being unable to reach the desired targets in terms of cost savings
from synergies and economies of scale. A potentially accretive
transaction could therefore well turn out to be dilutive.
- Overpayment: If company A is unduly bullish about company B’s
prospects – and wants to forestall a possible bid for B from a
rival – it may offer a very substantial premium for B. Once it has
acquired company B, the best-case scenario that A had anticipated
may fail to materialize. For instance, a key drug being developed
by B may turn out to have unexpectedly severe side-effects,
significantly curtailing its market potential. Company A’s
management (and shareholders) may then be left to rue the fact that
it paid much more for B than what it was worth. Such overpayment
can be a major drag on future financial performance.
- Culture Clash: M&A transactions sometimes fail because the
corporate cultures of the potential partners are so dissimilar.
Think of a staid technology stalwart acquiring a hot social media
start-up and you may get the picture.
• The Disadvantages of Merging Companies
- Clash of Cultures
- Diseconomies of Scale
- Consumer Perceptions
- The Layoffs Dilemma
- Higher Consumer Prices
According to collated research and a recent Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent.
Discussion Question 7 If mergers and acquisition quite often end up providing a competitive disadvantage, why...
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why do some animals end up choosing a not so quality
animal over a smaller animal or animal that is more tasty but
difficult to catch. in this case the example is given
of why this animal chooses the smaller animal? how can u test this
hypothesis
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Under the Microscope Chapter 7 Gabby is a surgical technologist who often scrubs in orthopedic procedures. She recently found out she is 10 weeks pregnant and is thrilled because she has been trying for some time. She has informed her supervisor, but finds herself scheduled to do total hip replacement procedure with a surgeon who uses bone cement and fluoroscopy to check the prosthesis placement. 1. Is Gabby or her fetus at risk by scrubbing in on this type of...
What does heat do?
7. How did the
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8. why does the methyl add to the beta carbon?
9. Why does the double bond occur?
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