Mergers and acquisitions (M&A) have drawn a lot of attention in the press over the years. The hostile acquisition of RJR Nabisco by Kohlberg Kravis Roberts (KKR) in the late 1980s, the merger of Time Warner and AOL around the turn of the millennium, and the acquisition of Chrysler by Cerberus in the middle of the first decade of the 2000s are just a few examples. The importance, success, and fallout from M&A activities create ample opportunities to discuss corporate strategic decision making both at its best and at its worst.
M&A activities are a critical portion of any firm manager's strategic decisions. M&A transactions involve two separate and distinct negotiation processes. The first negotiation process requires managers (and possibly shareholders) of both firms to discuss the merger terms and the valuation of the target firm. The second process involves resolution of any disputes arising between governmental regulatory agencies concerned over potential anticompetitive effects of the merger and the merging parties. A breakdown in either of the two negotiation processes will result in a failed merger attempt. Thus, a mere announcement of intent to merge by the acquiring and target firms is not a guarantee of merger success.
According to Michael Porter, a leading authority on company strategy, firms that want to sustain long-term profitability must respond strategically to their competition. M&A provides an important strategic response to competition by eliminating and absorbing them and therefore increasing the acquirer’s market share.
How can you ensure that your company always benefits from M&A activity? While final M&A decisions are often made at the highest levels of a firm, understanding both the reasons for and the risks of M&A can improve any manager’s business skills. The Accenture Academy course Introduction to Mergers and Acquisitions (M&A)
examines the broad topic of M&A and equips you with the tools necessary to increase profitability, improve strategic positioning, and create value for your shareholders.