Countless studies have been conducted over the years to measure the success of mergers and acquisitions. One of the most reliable sources is a study conducted by KPMG in 1999 of 107 mergers and acquisitions between 1996 and 1998, which showed that only 17 percent of these transactions increased shareholder value, 30 percent were unchanged, and 53 percent decreased its value. firm to shareholders (KPMG, 1999). Meager values were determined by measuring the share price of each company at the time of the contract and again one year later. A similar study by the Mckinsey firm on mergers, also in 1990, showed that less than a quarter of mergers generated excess returns on investment (Surowiecki, 2008). Another earlier study measured large acquisitions between the years 1971 and 1982. This earlier study also showed that by 1989, 44% of these acquisitions had already been divested, with the median time interval between acquisition and divestment being only seven years. Through large and diverse acquisitions, I am likely to get rid of four times more than related acquisitions. Of these divestitures, 42 percent of companies reported a profit on the sale of the target company, 44 percent reported a loss, and 14 percent even broke. The reason top reason why a company Cius and business are brought because of subsequent divestitures is a change in the focus or strategy of the organization (Kaplan and Weisbach, 1992).
With such poor overall performance, one wonders why companies are joining at such a rapid rate. There are notable patterns and trends. For example, mergers have been shown to be more successful when the two merging companies were similar, when the merger helped create market leadership, when the deal was stock-only, and when there was strong cash savings (Allred, et al. 2005). For example, the merger of J.P. Morgan and Bank One lead to three billion dollars in annual savings (Surowiecki, 2008) while companies often demonstrate financial inefficiencies in developing a large number of offenses, it has been shown that there is a major difference. to acquire and target the firm that was, the greater the probability that the deal would fail. Although closely related firms seeking to diversify have higher default rates, companies that have become large conglomerates, such as GE, have become exceptions to the rule as they have become experts in acquiring and merging with related firms.
Another major reason why companies merge and acquire each other when the possibility of success is so slim, by the nature of “golden parachutes”, if the Cius and the top executives are firm on the target, providing them with greater incentive. future firm deals. This, coupled with the feeling among CEOs that the company must “grow or die” pressures CEOs of failing corporations to quickly sell the company rather than preside over a failing firm, leads to acquisitions and mergers occurring with little concern for future firms.
Conclusion
Overall, various studies and quantitative analysis have shown that acquisitions create economic value, especially for financing. The main motivations remain in acquisitions rather than value creation or market potential. Similarly, mergers have generally been shown to create economic value through efficiency gains
Allred, B. B., Boal, K. B., & Holstein, W. K. (2005). Corporations as stepfamilies: A new metaphor for explaining the fate of merged and acquired firms. Academy of Management Executives, 19 (3), 23-37.
Kaplan, S. N. (2006, January 19). Mergers and acquisitions: an economic perspective. Northern Texas University Texas Library. Retrieved September 22, 2010, from govinfo.library.unt.edu/amc/commission_hearings/pdf/kaplan_statement.pdf
Kaplan, S. N., & Weisbach, M. S. (1992). Successful Acquisitions: Evidence from Dividends. Acta Pekuniae, 47 (1), 107-114.
KPMG 1999. Unlocking Shareholder Value: The Keys to Success, Mergers and Acquisitions, Global Report, KPMG, London. .
Surowiecki, J. (2008, June 9). All together now? : Lugduni Dutch. New York. Retrieved September 20, 2010, from http://www.newyorker.com/talk/financial/2008/06/09/080609ta_talk_surowiecki
