To merge or not to merge

IIPM PUBLICATION

M&As are growing, but caution a must

The continued hype over recent Mergers & Acquisitions (M&As) is not without reason. While Indian corporations may be riding the M&A juggernaut like a bull on a rampage, the underlying fact is that in today’s globalised markets, M&As are necessary to ensure competence on an international scale. Their importance can be highlighted by the fact that they deliver manifold purposes like increasing marketing share, generating economies of scale, increasing revenues, diversification, product innovation and vertical integration.

Some of the movers and shakers in recent times have been the offer by Porsche to take over Volkswagen, the EDS-Mphasis acquisition, Arcelor- Mittal acquisition, the IBM-ISS acquisition, the Barclays-ABN Amro acquisition, Google’s acquisition of YouTube, et al. Back home too, we have seen some frenzied M&A activity. Some instances are Tata-Corus, Jet-Sahara merger and the Vodafone buyout of Hutch-Essar.

However, quite a few mergers fail to deliver, like Daimler-Chrysler, HPCompaq and GE-Honeywell to name a few. Research proves that as a norm, most M&As end up being wealth destroyers, not to forget culture clashes and massive job losses due to redundant positions. It only goes on to show that M&As need to be carefully planned out. If companies tend to focus too much on the positives, they stand to lose much more than they hope to gain. 4Ps

4Ps B&M Research: Rohan Sachdev

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative