Merger - A merger is a combination of two or more
businesses into one business. Laws in India use the term 'amalgamation' for
merger.
In a merger, two organizations join forces to become a new business, usually with a new name. Because the companies involved are typically of similar size and stature, the term "merger of equals" is sometimes used – Example Daimler and Chrysler
In a merger, two organizations join forces to become a new business, usually with a new name. Because the companies involved are typically of similar size and stature, the term "merger of equals" is sometimes used – Example Daimler and Chrysler
Acquisition
– In an acquisition, on the other hand, one business buys a second and
generally smaller company which may be absorbed into the parent organization or
run as a subsidiary. A company under consideration by another organization
for a merger or acquisition is sometimes referred to as the target. Example Tata acquires Jaguar
Acquisition
has become a popular mode of entering foreign markets mainly due to its quick
access. Acquisition strategy offers the fastest, and the largest, initial
international expansion of any of the alternative.
Acquisition
has been increasing because it is a way to achieve greater market power.
The market share usually is affected by market power.
Therefore, many multinational corporations apply acquisitions to achieve their greater
market power, which require buying a competitor, a supplier, a distributor, or
a business in highly related industry to allow exercise of a core competency
and capture competitive advantage in the market.
On the other hand, there are many
disadvantages and problems in achieving acquisition success.
Integrating
two organizations can be quite difficult due to different organization
cultures, control system, and relationships. Integration is a complex issue,
but it is one of the most important things for organizations.
·
By applying
acquisitions, some companies significantly increased their levels of debt which
can have negative effects on the firms because high debt may cause bankruptcy.
·
Too much diversification
may cause problems. Even when a firm is not too over diversified, a high level
of diversification can have a negative effect on the firm in the long-term
performance due to a lack of management of diversification.
Joint venture - There are five common objectives in a joint
venture: market entry, risk/reward sharing, technology sharing and joint
product development, and conforming to government regulations. Other benefits
include political connections and distribution channel access that may depend
on relationships Such alliances often are favorable when – Example Hero Honda, Maruti Suzuki
·
The partners'
strategic goals converge while their competitive goals diverge
·
The partners'
size, market power, and resources are small compared to the Industry leaders
·
Partners are able
to learn from one another while limiting access to their own proprietary skills
The
key issues to consider in a joint venture are ownership, control, length of
agreement, pricing, technology transfer, local firm capabilities and resources,
and government intentions. Potential problems include
·
Conflict over
asymmetric new investments
·
Mistrust over
proprietary knowledge
·
Performance
ambiguity - how to split the pie
·
Lack of parent
firm support
·
Cultural clashes
·
If, how, and when
to terminate the relationship
