MERGERS, ACQUISITIONS AND STRATEGIC ALLIANCES
Companies seeking to explore more growth through external avenues have a myriad of options available. Mergers, strategic alliances, and acquisitions are some of the broad terms covered under this section as means of exploring the various avenues companies can adopt in a bid to expand. This paper comprehensively covers a myriad of potential approaches giving insights on the appropriate options for a particular company with reference to various factors influencing the company’s activities. It is vital for companies to have clear and concise understanding of the available options in order to harness the real potential and avoid destroying the shareholder value. The document explicitly discusses the various forms of acquisitions, mergers, and strategic alliances. It gives a firm understanding of the various options available to harness the external growth potential of companies.IntroductionFor the last three decades, mergers, acquisitions and strategic alliance activity have been booming around the globe with the activity levels standing in sharp contrast with its high failure rate. For instance, despite the turbulent economic times that hit the global financial market, the global value of M&A activity across the first half of 2010 clocked a staggering $1.5 trillion (Hellen & Marieke, n.d.).
The financial activity reported however did not include values of strategic alliances, which in most cases do not disclose their deal values. The tremendous growth in M&A and alliance activity is attributed to the company’s zeal and desire to achieve growth and ensure stronger competitive positions in the market. Today, this happens in an environment of increasing fragmentation and market globalization, rapid growth in national and international markets as well as the eradication of world tariff barriers. The environment has promoted consequent growth of large-scale companies and the concentration of different industries. The growth of a consumerism-based society in an environment characterized by dynamic taste and preferences gives rise to a more reduced product lifecycle thereby creating the need for a continuous innovation and technology investment. Other internal factors such as the need to spread risk to cushion companies against the increasing uncertainties of the fast changing market, the need for development speed to achieve synergies among them economies of scale and scope, as well as the ever increasing need for collaborative planning between organizations. As a result of this, mergers acquisitions and alliances have increasingly become the preferred development methods preceding organic growth (Emanuel, 2011).
The study of mergers and acquisitions (M&A) is an essential study perhaps due the extremely high failure rates associated with the partnerships (King, et al., 2004). Despite the various factors affecting the post-acquisition performance, value creation through the formation of synergies between the merging firms is arguable one of the most vital factors affecting the processes greatly (Schweiger & Walsh, 1990; Schweiger, et al., 1991). The combination of the two firms’ unique resources help create synergies which the individual companies would not have on their own. To achieve this, some degree of integration between the merging firms is necessary (Larson & Finkelstein, 1999). Integration …