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Need an argumentative essay on Mergers and Acquisitions in the Automotive Industry. Needs to be 18 pages. Please no plagiarism.Download file to see previous pages... M &. As in management literatur
Need an argumentative essay on Mergers and Acquisitions in the Automotive Industry. Needs to be 18 pages. Please no plagiarism.
Download file to see previous pages...M &. As in management literature: The study of literature on business strategy is replete with references to alliances, acquisitions, mergers and takeovers with its variations like hostile takeovers. The objective of all these processes is to create a larger and financially more powerful company (Campbell, Stonehouse and Houston 2004, p. 215). Even at the global level M &.As have increased in number and scale phenomenally since the 1990s. Businesses use them to consolidate in their search for scale economies, e.g. BP-Amoco. to increase their global reach and competitiveness e.g. Daimler-Benz. acquire competencies, or new technologies e.g., Sony-Columbia (Lasserre 2003, p. 134) and convergence of services (AOL-Time Warner).
In spite of increased M &. A activity during the 1990s, there was some scepticism as to their success in achieving their intended purpose. It appears, Michael Porter argued that half of purchases benefited shareholders and the acquiring company in the long run Michael Traem of the consulting firm A.T. Kearney, deemed only 42% of mergers successful and Mark Sirower of the New York University estimated the success rate at just 35%. However the proponents of the M &. As questioned the validity of these claims on the ground that the studies of the three researchers mentioned were not only dated - with Porter's studies based on the 1980s and the other two based on the early 1990s. Further they were based on just 200 M &. As, too small a sample size. They argued that conditions had indeed changed since then which suggested a higher success rate but conceded that there was an amount of risk involved in the strategy. The risks involved in the strategy, according to Sirower, were that unlike other opportunities, M &. As required an 'up front' commitment. For example a company developing a new product might decide to halt spending on it at any stage from R &. D to marketing but in the case of acquisitions, "the cost of capital starts ticking right away". Again the proponents argued that the M &. As of the past were different. The M &. As of the 70s were conglomerization, those of the 80s were high-leverage, hostile takeovers known as bootstrap operations. On the other hand, the M &. As of the 90s were fundamentally different with companies consolidating horizontally and geographically with enormous potential for synergies that drastically cut costs and overhead. It was in the ensuing debate that Sirower published his, by now famous "The Synergy Trap". He argued that studies showed that stock deal under-perform cash deals as this sends a signal to that value is being transferred from the acquiring shareholders to the acquired shareholders. He explains this with an example. If a company is valued at $ 50 million and the acquiring company projects a future valuation of $ 100 million the company may pay $ 80 million to acquire it. However, transferring stock amounts to paying an additional $ 20 million. This sounds similar to Koch's argument (2000, p. 101-103) to acquire an undervalued target but in reverse. Further, Sirower argues that in case of cash payments, the company budgets interest payments as a part of the integration process.
