The Benefits of a Merger or Takeover in Terms of Synergy - Essay Example

In 1995 Kaushal stated that, with the changing economic, legal, social, and political environments, factors affecting the formation of mergers and acquisitions also change (Kaushal, 1995, pp.22-35). In 2004, Neary argued and said that strategic rationale and efficiency gain derived out of mergers and acquisitions are the two common reasons identified by Business Organization Literature (Neary, 2004, p.48). To study the literature on this research area, empirical researches done related to this study will be collected from online books and journals. Most of the previous researches indicated that M&A activity has a 50 percent chance of success which is similar to the probability of getting a ‘head’ when an individual ts an unbiased coin. In 2004, Bruner argued and said that synergy means co-operate or work together and involves a merger when two organizations come together and pool in their resources and expertise for better performance, which is also known as synergy. Thus, in order to achieve continuous growth and survive global competition, it is important for organizations to adopt an M&A strategy.
In today’s world, the primary objective of a firm is to survive the cut-throat competition and one way to do that is to make more profits and add value to shareholders’ wealth. The ladder of success for any firm is ‘growth’ which can be achieved either by expanding existing resources or introducing new products and services. Another way of achieving growth is through mergers and acquisitions (M&A).
It has become an important way for firms to expand their product portfolios and gaining new markets. M&A also helps the firm to acquire knowledge, the latest technology, and improved management capabilities. In addition, M&A has been found to be extremely successful for specific sectors like pharmaceuticals where extensive Research & Development are required.
Tesco is a British-based multinational grocery and general merchandise retailer. Its headquarter is in Cheshunt, Hertfordshire United Kingdom.