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The World of Mergers and Acquisitions

Capstone Research Project

Morris College

Nicholas Wilson

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Table of Contents

Page 3................................................................................................................................. Abstract

Page 4......................................................................Thesis Statement, Methodology, Introduction

Page 5................................................................................ Definition of Mergers and Acquisitions

Page 7............................................................................................Reasons Why Companies Merge

Page 10....................................................................................................How Mergers are Formed

Page 12...................................................................................................................Vertical Mergers

Page 15..............................................................................................................Horizontal Mergers

Page 16....................................................................................................Market Extension Merger

Page 17...................................................................................................Product Extension Merger

Page 18..........................................................................................................Conglomerate Merger

Page 20..........................................................................................Examples of Successful Mergers

Page 21......................................................................................Examples of Unsuccessful Mergers

Page 24...................................................................................................................................Charts

Page 30..........................................................................................................Regulation of Mergers

Page 31........................................................................................................Problems with Mergers

Page 32..........................................................................................Recommendations and Conclusion

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Abstract

The purpose of this research paper is to describe the attributes of Mergers and

Acquisitions. There are many different area to explore when talking about Mergers and

Acquisitions. First, I will explain what is meant by the words "Mergers" and "Acquisitions."

Another important topic that I will discuss is the reasons why companies merge or acquire

other companies. I will break down the process of these combination of entities. While on this

topic, I will reveal what is necessary for a company to merge with another company or for a

company to acquire another company. Also talked about in this essay are the different types of

Mergers and Acquisitions. There are variety of ways that companies can become one entity.

Another topic worth discussing is the regulation that is involved with mergers and acquisitions.

What are the laws and why are they in place? There will also be some examples given of

famous merger and acquisitions of today and yesterday.

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Thesis Statement

Although the terms mergers and acquisitions are used to describe the combination of

two companies to form a new single company, there are many different distinct types of

mergers and acquisitions. Although a mergers and acquisitions are sought by companies to

achieve some advantage, there are a number of other reasons that a company may want to

give up its independence.

Methodology

This research was conducted through the use of internet sources. Information was

gathered from online articles, online databases, and online reports.

Introduction

The history of mergers and acquisitions first began during the 19th century. This period

was anti-competition and consisted of mergers that were between companies that enjoyed

control over their respective markets. A majority of the mergers that took place during this time

period were horizontal and they took place in the metal, steel, and constructions industries.

During the first decade of the 20th century, a majority of the mergers that took place were

unsuccessful. The deals that took place during this time period failed because of their inability

to attain the competence to keep the new businesses running. The stock market crash of 1904

was preceded by the crash of the world's financial system in 1903. After the crash, the apex

judiciary body, another name for the Supreme Court, regulated mergers by issuing a law that

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allowed mergers to be competitive; the law also stated that mergers could be de-merged by the

Sherman Act, which was an act to encourage competition or to prevent monopolies. The

concentration of the 1916 through 1940 period were mergers between oligopolies, which are a

few small firms that dominate a market. Oligopolies were the focus of this period as opposed to

anti-competitive firms. This new wave of mergers and acquisitions was a result of the financial

boom that occurred as a result of World War I. This new world of mergers lead to

developments in the science and technology industries. It also lead to many new infrastructure

firms that helped develop railroads and automobile transportation. Many financial companies

such as banks were an important factor in the new found success among mergers and

acquisitions. This twenty plus year period ended with the sharp decline of the stock market that

lead to the Great Depression. During the 1960's, a majority of the mergers were horizontal

mergers. These mergers happened because of elevating stock and interest rates, but they were

also a result of anti-trust rules and regulations. The 1970's also saw mergers that performed

effectively. Examples of effective performing companies were INCO merging with EXB, and OTIS

Elevator merging with United Technologies. The period of 1992 to the present day has seen

acquisitions that were much larger in size than acquisitions of the previous years. Certain

industries such as the oil, gas, pharmaceuticals and banking industries began to merge with

international companies that were in their respective industries. Anti-acquisition regulations

were also introduced during this period.

Mergers and acquisitions are two terms that are used to describe combination of two or

more companies or organizations. These companies find it necessary to add more employees or

capital to their current business. A merger takes place when two or more companies combine

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their operations into a single entity. This happens because the stockholders of one company are

offered securities is exchange for their share in the company that is being acquired. Mergers are

used by companies to expand their operations often to increase their long term profitability.

The least important company loses its identity and becomes a part of the more important

corporation, which maintains its identity. A merger ends the company that is being absorbed,

and the surviving company assumes all the rights, privileges, and liabilities of the absorbed

company. A merger should not be confused with a consolidation, in which two corporations

lose their separate identities and combine to form a completely new company. An acquisition is

a process in which a company takes to buy most, if not all, of the target company's ownership

stakes in order to assume control of that firm. Acquisitions are also known as takeovers. In an

acquisition, a company purchases another company, and obtains the right to sell off operations,

merge them into their company, or close facilities or cancel products altogether. Acquisitions

are sought after by companies as a method to grow. This allows a company to takeover a target

company's operations and niche. Acquisitions are seen as more beneficial than expanding its

own operations. An acquisition is often paid either in cash, the acquiring company's stock, or a

both. Acquisitions can be either friendly or hostile. A friendly acquisition occurs when a firm

agrees to be acquired. On the flip side, hostile acquisitions don't have the same agreement

from the target firm. In a friendly acquisition, the companies cooperate in negotiations. In a

hostile takeover, the target company is unwilling to be acquired or the target's board has not

been previously notified of the offer. The company that seeks to acquire another company

must buy large stakes of the target company the obtain a majority stake. In either case, the

acquiring company often offers a premium on the market price of the target company's shares

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in order to coerce the shareholders to sell. News Corp., for example, bid to acquire Dow Jones

with a 65% premium over the stock's market price. A acquisition or a merger usually begins

with discussions between the boards of each company. Next, they have a formal negotiation,

then followed by a letter of intent, due diligence, and a purchase or merger agreement. Finally,

the deal and the transfer of payment takes place. These transactions can be complex, and they

can take a long time to come to fruition. For these reasons, companies will hire investment

bankers or other financial experts to handle mergers and acquisitions.

After learning what mergers and acquisitions are, one might wonder why companies

merge in the first place. There are various reasons as to why companies merge. One reason is

that the combined corporation would be larger, and it would also have larger resources for

marketing, product expansion, and obtaining financing. The newly formed company would have

a better chance at competing in the marketplace. Another reason why companies merge is so

that the combined company could merge their operations to reduce costs. Companies might

also choose to combine the production areas if the companies produce similar products, and

therefore reduce costs by having fewer plants or facilities to operate with. Also, the newly

formed company might have as much competition in the market. If the two companies

competed for customers, they could combine their products and services and use resources for

improving those products and services, rather than marketing against each other. Another good

reason for a merger between two companies is that the combined company would create

synergy. Synergy is the potential financial benefit that is achieved through the combination of

companies. Synergy is often a driving force behind a merger. Business will naturally want to

merge with another business that has complementary strengths and weaknesses. The synergy

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achieved through the merger can be attributed to various factors, such as increased revenues,

combined talent and technology, or cost reduction. The question of why another company

would want to buy another company may arise. Well, to answer that question, the goal of any

business in a capitalist society is to obtain revenue. The act of buying another company would

help accomplish this goal. Mergers is also a strategy that companies use to obtain

diversification. "Diversification is the reduction of risk through investment decisions (Peavler

1)." If a large firm believes that it company is at risk because it only has a presence in a single

industry, it may buy a business in another industry. This would create more diverse economy

for the acquiring firm. To put it in simpler terms, the acquiring firm no longer has all its eggs in

one basket. There are also other aspects of diversification that may cause firms to merge. If a

firm were to merge with or acquire a firm in another country, there may be a reduction in risk

of operating in the domestic country. This is all due to the diverse economic and political

climate. There is also the benefit of reducing foreign exchange risk and localized recessions.

Another reason that firms decide to merge is for better financing. A company may look to

merge with or be acquired by another company if it is struggling financially. If the company

cannot find another company to merge with, than it would have to go out of business or file

bankruptcy. A larger firm would have more accessibility to financing than smaller firms. The

new entity formed by the merger may allow the firm to access debt and equity financing that

was not a possibility before the merger. There are also tax advantages associated with mergers.

One advantage in particular, is called a tax loss carry forward. This meaning that if one of the

firms had a negative gain in revenue before the merger, then that number would be offset

against the profits of the firm that it had merged with. This is a very significant benefit to the

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newly merged firms. If two firms merge that are in the same industry merge together, then it

may result in operating economies. Functions that would normally be duplicated, such as

purchasing, marketing, and accounting may be eliminated because of the newly formed

company. The day-to-day functions of a business could be a financial burden for small firms.

The new firm that is created from the merger or acquisition will be in a better financial position

to afford the everyday functions of the firm. The attainment of economies of scale is also

another reason for mergers and acquisitions. "Economies of scale simply means that the cost

of doing business, whether in manufacturing or the aforementioned operating economies, will

be lower in the combined business firm (Peavler 2)." If the producers are able to lower the cost

of doing business, than the price that consumers will pay will be lowered as well. The thinking,

in one camp, is that if the cost of doing business is lower, that cost will be passed on to the

consumer, resulting in a win-win situation. A company may view mergers and acquisitions a

means of increasing its capabilities. The increased capabilities may be a result from the

expanded research and development or the increased manufacturing as result of the merger.

Another reason for merger is to gain a competitive advantage. A company wants to obtain

better distribution and marketing networks. A more advanced marketing and distribution

network will give both companies a broader consumer base almost instantly. Firms also look to

sharpen their business focus. Companies will merge with other companies that have more

market penetration in a key areas of operations. Businesses merge to increase supply-chain

Pricing power. If a firm buys out a supplier or distributor, then the firm can lower costs. Buying

out a supplier means that a firm, it is able to save money on shipping cost that the suppliers

were previously taking away. Buying out a distributor means that a firm may be able to ship its

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products at a lower cost. The elimination of competitors is also another motive for merging

with another firm. Mergers and acquisitions make it possible for the acquirer to eliminate its

competitors and it also allows the firm to increase its market share. The negative part of this is

that a large premium is needed to get the target company's shareholders on board with the

deal. Replacing leadership is also another motivation that leads to a merger. In private

companies, the company may need to merge or be acquired if they cannot decide on who shall

take over the company once the owners retire. Sometimes a company may choose to merger in

order to stay afloat in the global marketplace. For a company to surrender its identity to

another company may be one of the most difficult decision that a business has to make, but it

may sometimes be the only option for survival. Many companies used mergers and acquisitions

to survive during the Great Recession of the late 2000s. During this time, many banks merged in

order to keep from being forced to close.

Another good question that should be answered is what goes in to making a merger

come to fruition. A merger is the result of a company seeking benefit from the combination of

its company along with another company, in order to increase its shareholder value. Thinking

logically, a merger of two similar sized companies would combine their stocks into a new

company. But, in reality, the two companies make an agreement that one company will buy the

other's stock form the shareholders in exchange for their own stock. As a shareholder in the

company, the decision of whether or not the company decides to merge with another company

is partially up to you. The voting process for a public company usually involves a shareholder

voting in favor of the merger. A merger could be a great financial opportunity or it could be

disastrous. An analysis must be done in order to draw a conclusion about the possible decision.

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As a shareholder, using the shares that you own is a good way to help making a decision for the

company. Shares are not the only important factor in making decisions like this. The impact that

is made on the community as a result of a merger between two companies is also very

important. The merger could result in a loss of jobs in the community. The other company

participating in the merger could have some practices that may be unethical. As a investor, it is

crucial that a company makes money. After all, that is why a company exists, to make money.

Even though money is a big part of the deal, the non-financial factors could also be big enough

to become deal breakers. Being familiar with the financial reports are also a crucial part to any

deal. To decide whether to go forward with the deal or not, look over the company if you are

not familiar with their financials. If the financials are not good, then there is a great chance that

the newly formed company will not be any better. It is important to look at the most recent

financial statements and reports when looking at the two companies involved in the merger.

While it may not be the most exciting thing, knowing the financial state of a company that is

involved in the merger is very important; after all, their financial state will soon become your

financial state. The newly formed company will have some changes that are different from the

companies that formed it. The faces that are in the leadership position will be one of the most

common changes. Leadership positions such as the members on the board of directors and the

executives in the company may not change at first, but may change soon after the formation of

the new company.

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Merger is a term used to define the formation of two or more companies into one

identifiable company. While any combination of companies can be called a merger, there are

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many different types of merger with very distinct characteristics. One type of merger is called a

vertical merger. A vertical merger is a merger between two different companies that produce

different goods or services for one specific finished product. A merger like this occurs when two

or more companies that have operations on a different level of the supply chain in a certain

industry, merge their operations together. The reason for mergers are to create synergy

between two companies and make their operations more efficient by becoming one entity. By

directly merging with suppliers, a company can increase its revenue and decrease its reliability

on an outside source. Reducing operating costs and increasing profitability is the goal of a

vertical merger. The reason that a company may want to merge with a supplier is to obtain

access to raw materials. Vertical mergers can be very instrumental in obtaining important

supplies. They are also very instrumental in helping to reduce overall costs through the

elimination of finding suppliers, negotiating deals, and paying premium market prices. This type

of merger also improves efficiency through the synchronization of products and supplies

between the two companies. This helps ensure that supplies are available when the company

needs them. A vertical merger if also very effective in dealing with competition. This type of

merger makes it difficult for competitors to access important supplies. This also weakens

competitors and created barriers to competitors looking to enter into the market. A good

example of a vertical merger would be a car manufacturer that purchases a tire company. This

type of merger helps the car manufacturer by reducing the cost of tires and can expand

business of supplying tires to competing automakers.

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Another type of merger is called a horizontal merger. A horizontal merger is a merger

that occurs between companies in the same industry. A horizontal merger can be described as a

consolidation that is formed from two or more firms that operate in the same space. These

companies are often competitors that offers similar products or services. The two companies

that seek merge into a single entity serves the same market, which makes the merger

horizontal. These types of mergers a more common in industries with a few firms. This is

because there is more competition and synergy and potential gains in market share are greater

for merging firms in this particular industry. Because of the amount of companies try to achieve

an economy of scale, horizontal mergers occur most often. The merger of Daimler-Benz and

Chrysler is a very good example of a horizontal merger. A company can obtain a larger share of

the market if the company that they merge with sells similar products and services. You can

offer a broader range of products to consumers, if the other company sells complementary

products. When a company merges with another company that offers different products to a

market segment that is different from the market that they are in, then it becomes possible to

diversify and enter entirely new markets. Increasing profits and offering new products to

customers is the goal of a horizontal merger. There is no need to spend resources in order to

invent new products. Selling your products to different geographic regions become a possibility

when a horizontal merger occurs. The distribution centers and customers that were not

previously yours, you obtain through the merger. Reducing the threat of competition is also a

possibility as a result of a horizontal merger. This newly formed company had access to more

resources and a larger market share, which allows this new company to achieve a greater

economy of scale.

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Another type of merger is a market extension merger. This type of merger is the result

of two companies that produce the same products, but in two different markets. For example,

when two different financial firms that offer the same product of service agree to merge their

operations together, it is because they want to make a presence in a larger market. The goal of

market extension mergers are to enter into a larger market. By entering into a larger market, a

company had access to a larger consumer base. It is very important that when a market

extension merger is established between partners, that both companies learn to coincide with

each other when their different environments merger together. When a small firm merges with

a company that is larger, their different beliefs and ways of conducting business can clash. This

can hinder that company's success. Besides, what made a smaller company successful, may not

help a larger, newly merged company succeed in the market.

The acquisition of Eagle Bancshares by RBC Centura is a very good example of a market

extension merger. Eagle Bancshares was a company that was headquartered in Atlanta. The

company was home to more than 200 employees. Eagle Bancshares was a firm that had 90,000

accounts and had approximately $1.1 billion in assets to its credit. The bank held Tucker Federal

Bank, which is a company that held the title of being one of the largest banks in Metro Atlanta

in terms of deposit market shares. What makes this acquisition so significant is that it allowed

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RBC to grow its operations in the United States market. This acquisition was vital in aiding RBC

Centura to move into the Atlanta market, a market that is a leader in the United States financial

market.

Product extension mergers are also another type of merger; but unlike market

extension mergers, product extension mergers are mergers that occur when two companies

that deal with products that are somehow related to each other and that also operate in the

same market merge their operations together. This type of merger helps companies to combine

their respective products in order to obtain a larger consumer base. The company, in turn,

makes a higher profit.

An example of a product extension merger would be the acquisition of Mobilink

Telecom Inc. by Broadcom. Broadcom is a company that manufactures Bluetooth personal area

network hardware systems and chips for IEEE 802.11b wireless LAN. Mobilink Telecom Inc. is a

company that manufactures product designs for handsets that are equipped with the Global

System for Mobile Communications technology. Mobilink is on its way to being certified to

manufacture wireless networking chips that are equipped with high speed and General Packet

Radio Service technology. The new products at Mobilink would complement the products of

Broadcom.

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A conglomerate is another type of merger that is used in the corporate world. A

conglomerate is a merger between firms that are involved in different business activities. These

different business even have different suppliers and vendors. A conglomerate merger consists

of two companies that are not competitors, have no common interest. "Essentially, the

conglomerate merger usually brings together two companies with no connections whatsoever

under one corporate umbrella (wise Geek 1)." Conglomerate mergers are desired by investors

who want to have a strong presence in two markets. The popularity of conglomerates came

about in the 1960's when companies that operated in a single line of business wanted to

diversify the nature of their business through mergers and acquisitions. While on the topic of

conglomerate mergers, it is important to note that there are two types: a pure conglomerate

merger and a mixed conglomerate merger. A pure conglomerate merger occurs when the

companies involved with the merger have not either a direct or indirect connections. These

types of mergers are made up of companies that have absolutely nothing in common; but a

mixed conglomerate merger are made up of firms that seek to extend their products or their

markets. This type of conglomerate merger still involves companies that are non-competitors,

but they may share vendors or they may share some characteristics in a common industry. In

mixed conglomerate mergers, the two companies merge together in order to obtain access to a

larger market and consumer base. Firms form mergers for many reasons. They might want to

increase their market share, create synergy between the two of them, or for cross selling.

Another reason for conglomerates are for diversification and the reduction of risks. But, if a

conglomerate become too big because of the companies it has acquired, then the firm could

suffer. This was seen during the 1960's era of conglomerate mergers. There are many other

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reasons that a company might consider a conglomerate merger. A company's desire to increase

its market share and to be more involved in cross selling is amongst the most common reasons

for consideration of conglomerate mergers. Developing synergy is also another purpose behind

not only conglomerates, but any type of merger. A conglomerate may be formed in order to

allow two businesses to have access to each other's resources in order to gain significant

advantages in their respective industries. These types of mergers are also formed in order to

protect companies from the dangers of a declining economy. The formation of conglomerates

have been the force for companies for surviving shifts in consumer tastes, the advances in

technology that have made certain products extinct, and also the shifts in politics. "Many

business analysts find that a conglomerate merger, when handled properly, will result in the

newly combined multi-industry corporation being significantly stronger than the individual

companies could ever hope to become (Wise Geek 1)."

While conglomerates may be beneficial to companies, they also come with some

implications. Companies forming conglomerates in order to increase the size of their companies

has been a running theme. Despite the reason behind the decision to merge, conglomerates

can also have adverse effects on the functioning of the new company. This seemed to reign true

throughout the 1960's when conglomerates became popular. Another implication that arises

when two different companies form a new one is the fact that they do not attract the same

type of customers because they were operating in two totally different industries. Many

companies also pursue conglomerates because it gives them the ability to handle a wide range

of activities for a particular market. These companies would be able to conduct research

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activities and engineering processes that they could not have done before. These companies

also can increase their production and also increase profitability by strengthening the market.

An example of a conglomerate would be the one and only CBS Corporation. CBS broke

way from Viacom in 2006, and since then it had controlled much of its television and radio

broadcasting business. It is the most watched network under its brand. The CBS Corporations

has made more than $14 billion in revenue and more than $1.3 billion in profit. CBS owns 50%

of the CW network and its has full ownership of Showtime and CBS Radio. CBS also owns its

own sports network.

There have been many successful mergers and acquisitions in the corporate world. One

such acquisition, was the acquisition of Pixar by Disney. The deal took place in 2006. The

transaction value of the deal was $7.4 billion. This acquisition combines Pixar's creative and

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technological resources with Disney's array of world-class family entertainment, franchises,

theme parks, and cartoon characters.

Another example of a successful merger is the merger of Exxon and Mobil in 1999. The

deal was worth $81 million. The newly formed company was called ExxonMobil. As a result of

this deal, ExxonMobil became the largest company in the world. This merger was so large, that

the FTC had to regulate the restructuring of the company. The FTC had to restructure the

company in order to keep it from monopolizing the market. Even today, ExxonMobil remains

the strongest leader in the oil market. It is still the world's largest public held company, second

only to WalMart.

An example of a unsuccessful merger would be the merger of Daimler-Benz and

Chrysler. The merger took place in 1998 and was worth $37 billion. The reason behind the

merger was to create a trans Atlantic car making giant that would be a force to be reckoned

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with in the automotive industry. Although they had a plan, things did not work out. By the ear

2007, Daimler Benz had sold Chrysler to Cerberus Capital Management, a company that

specialized in restructuring companies that were struggling. Daimler sold Chrysler for $7 billion.

The merger of Sears and Kmart in 2005 is also seen as an unsuccessful merger. Both

companies were purchased by Eddie Lampert and renamed Sears Holdings. Sears, once a

legend found itself lagging behind department stores like Target and Wal-Mart, and high-end

stores like Saks Fifth Avenue. Some speculated that the downfall of Sears Holding was caused

because the fact that the sell soft goods, such as clothes and home goods, rather than selling

hard goods, such as appliances and tools. Some others credit their downfall to trying to

compete with Wal-Mart. No matter the case, by 2007, Eddie Lampert was named among

America's worst CEOs. As of today, Sears Holding is still on a downward path.

The merger of Nextel and Sprint occured in 2005. The intent of this merger was to

combine the opposite ends of the communications market spectrum, which consisted of cell

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phone and home phone service from Sprint, and business, infrastructure, and transportation

from Nextel. The deal was reported to be $35 million. Not long after the merger, important

entities from Nextel such as the managers and executives began leaving the company claiming

that the two cultures were not agreeing on anything. Around the same time, the economy

started to decline, and customers of Nextel and Sprint wanted more from their providers.

Because of competition from Verizon, AT&T, and the iPhone, sales began to fall ,layouts came

about in the company, and the company's stocks bottomed out. This merger was clearly a

failure.

Time Warner Cable merged with AOL in 2001 and the merger is also known as a

failure. The merger of these two companies was thought to be revolutionary because of the

popularity of the internet at the time. Time Warner Cable was a media heavy-hitter and AOL

was an Internet and email provider. The merger was worth $111 billion. The synergy of the two

companies never occurred. Because of the decline of the dial-up internet access, the newly

formed company never got off of the ground. Ever since the merger, the stock of Time Warner

Cable has fallen by 8o percent.

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The same way a company must be regulated by the government before a merger or

acquisition, they must also be regulated after the formation of a new entity. Mergers and

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acquisitions are monitored by the Department of Justice and the Federal Trade Commission.

The Federal Trade Commission is an agency whose purpose is to prevent monopolies and

encourage competition in the marketplace. The commission prevents fraud, deception, and

unfair business practices. The Department of Justice is a government agency whose purpose is

to enforce the law. Mergers are monitored heavily by these two agencies. They come to the

decision on whether or not a merger is legal or not. If they do not approve of the deal, then

there can be no merger of the two companies. A set of guidelines are published in order to

regulate the legality of the merger. This is to ensure the protection of consumers from illegal

pricing. It also ensures that there are a variety of businesses. To get a better understanding of

the potential of the influence of a merger, the FTC and the DOJ conduct economic reviews of

market conditions and the entire field of competition. They also examine whether the newly

merged company would have the ability to influence competitors or the ability to manipulate

prices in a way that could potentially harm customers. An important provision the in U.S.

antitrust law is the prevention of mergers and acquisitions that are non-competitive. Under a

law called the Hart-Scott-Rodino Act, the Federal Trade Commission and the Department of

Justice have the authority to review a majority proposed transaction that have some affect on

business in the United States, or any transactions that are over a certain size. These two

agencies can take the legal actions to stop deals that they believe would hinder competition in

any way. There are some exemptions, but for the most part the law forces companies to report

deals that have a value of more than $77.3 million to the FTC and the Department of Justice in

order to be reviewed.

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As with any type of business deal, the comes a set of problems or issues. With mergers

and acquisitions, there a numerous problems that occur because of the formation of a new

company. One problem with mergers is that many mergers and acquisitions involve companies

that are headquartered in different countries. This could be a problem when trying to choose

which practices will best suit this new company. Managers may assume that their knowledge

applies globally and they do not always take into consideration that performance drivers vary

from culture to culture. Another issue that may arise are the language barriers associated with

a merger or acquisition. Information about the deal must be communicated in all languages

spoken in order for all questions to be answered. The employees of both companies must be

taught and educated on the other language so that communication can be effective and

productivity can happen. Having good employee retention, communication, and training are

very important. These activities should be customized to suit the employee population. Training

is also another issue that results from a merger or acquisition. If it is not taken into

consideration, it could present several obstacles. Without providing training, the new

employees will take longer to get adjusted to their new work environment. Selecting employees

must be based on operational requirements after a merger. If cuts are made too quickly, human

capital can be lost and there could be a greater cost in attracting new employees or re-hiring

previous employees as opposed to retaining current employees.

Recommendations As with any problem, there need to be solution on how to solve those problems. To deal

with the problem of company's headquarters being located in different countries, I suggest

Wilson 32

that the two companies try both cultures and choose which ever one suits the best needs of

new company.

To deal with language barriers because of the combination of companies from different

countries, the new company should have translators to help bridge the gap between

languages. As with any company, communication is important.

To deal with training issues, I suggest that the company provides training for every

employee. Because the company has taken on a new identity, training will help everyone to

get familiar with each other and also help familiarize them with the new company and its

culture.

Conclusion

There are many types of mergers and acquisitions. There are also a variety of reasons that a

company may choose to undergo a merger or acquisition. No matter the reason, to undergo a

merger or acquisition is to undergo a change. Whether it is a chain in command, culture, or

supply chain, this change should be taken seriously. There should be serious consideration in

who will run the new company, what kind of employees the new company will have, the new

mission and objectives of the new company, and what type of products and services this new

entity will provide.

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Wilson 33

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