MERGER AND ACQUISITION: A STRATEGY FOR CORPORATE REORGANISATIONAL GROWTH

O. S. Uwakaeme

Abstract


Merger and acquisition have become not only a method of external corporate growth, but also a strategic choice of the firm which enable further strengthening of core competence within an organization. In recent times, many corporate firms have resorted to merger or acquisition for their restructuring and reorganizational growth. Merger and acquisition have also brought about critical structural changes in some industries which have attracted international attention. A decision to carry out merger or acquisition is certainly a risky one, not a least, because of number of factors influencing the final outcome. It is a decision frequently based on wrong objectives and incorrect valuation process if it is not handled carefully.  A number of motivations for merger and acquisition proposed in the literature are mostly drawn directly from finance theory but with some inconsistencies. In most cases, distressed firms are found to be the pillagers and the market reaction to these is not always predictable. Several financing options are associated with takeover activity and are generally specific to the acquiring firm. Given the interest in the academic and business literature, mer­ger and acquisition will continue to be an interesting but challenging strategy in the search for expanding corporate influence, profitability and growth. However, the process of merging with another company or acquiring another company is extremely complex. Bearing these challenges in mind, there is need for corporate firms and other stakeholders to have a clearer understanding and potential implications of merger and acquisitions in order to reduce the high percentage of merger and acquisition failures. This paper therefore, adopting a normative and theoretical review, analyzes the strategies and processes for effective mergers and acquisitions as a strategy for corporate reorganizational growth, with clearer understanding of the potential implications of merger and acquisition failures and preventions.      


Keywords


merger; acquisition; takeover; synergy; efficiency; takeover regulations; takeover financing; market reaction; and wealth effect

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