Shashank's Musings

To merge or not to..

One of the foremost and primary (what they all say...maybe true or maybe not...)is that mergers , people beleive will lead to appreciation of shareholder value thus enormously benifitting shareholder by unlocking true worth of their investments . A Larger corporation which results as synergy between smaller companies is usually worth a lot more .This also a echo of the current belief among top corporate gaints that 'size matters' and will do so infinetly more in the new century .The bigger they are, the better they can position themself to face competition in a global market and take full benefit of it.This attitude account part for the large no of mergers and aquistions happening or being proposed accross the financial world in all industries .
Further mergers also allow companies to cut down overlapping areas , strenthen where required and concentrate on what 's inline with its vision and goals.Cutting down on overlapping areas means firing a lot of people ,so you tend to save a lot in severed salaries.
Companies also argue that this strenthen's unions making them more dynamic and in sync with today's economics.U could also argue on other hand that mergers also strengthen the top corporate's luxurious pay packets and incentives,bonuses .... the works .
Mergers and Aquistions (M&A)have today emerged as a way to grow for company in alternative of doing so through sound strategic positioning and planning. In an environment where top corporates are in pressure to show growth -fast growth ,every quarter and faster growth every other quarter M & A offers a way to show quick growth maybe atleast for a few quarters.M&A have become a stategic fallback in absense of intelligent choice of strategy and thinking.

A very possible halo..

Even a good deed done with wrong intentions or here,not done rightly is wrong or here,can have catastrophic consequences for a corporation.

Edward De Bono,the renowned management guru says 30% of all megers fail-collapse shareholders value,20% do so to a lesser extent, 37% appreciate value to fraction of what was initially proposed and only 17% hit the jackpot.Yes only that much .... actually work.

One of the reasons attributed to this is that culture contrasts can paralyze a deal even before fruition.A traditional no-risk company going on to gobble a free wheeling creative enterprise and expecting things to be gory just by saddling each with the other partner is a marriage doomed to failure.Corporate culture is an expression of values,beliefs and patterns ,unique to each organization.Its a way of doing things deeply ingrained into each organization and people who compose it.To change it or even adapt it reqiures a process of educating and takes time and if not handled properly sights a merger considerably.

Mergers also should gaurd against reduced management focus on significant tasks or against burdening management with more than humanly possible , leading to neglect of some tasks.

Despite these concerns Mergers and aquistions look set to the trend which will shape the future of the finance world across all industrail segments.As corporate culture world over looks to bet on getting bigger and meaner, mergers and aquistions seem destined to alter the landscape inevitably.The Godzilla movie's legend "Size Matters" never seemed more prominant than it does today.

posted by Shashank @ 10:17 PM