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Merger and acquisition: a story of success and failure - Research Paper Example

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Merger and acquisition: a story of success and failure

According to the Harvard Business review, the yearly expenditure incurred by the companies on the acquisitions is more than two trillion (Christensen, Alton, Rising, & Waldeck, 2011). Bitter truth of the story lies in the fact that organizations seduced to acquisition for the fast paced growth fail with a great number. Nearly 70 to 90 percent of the acquisitions fail to achieve the objectives set forth as the ground for the acquisition (Christensen, Alton, Rising, & Waldeck, 2011). The percentage of failure self evidences the fact that organizations adopting acquisition strategy have failed to learn the lessons from failure examples. Examples of the failed acquisition include prominent names of the corporate world across the globe. Furthermore, the failure examples are spread across industries from media to technology, oil to banking and so on. Some of the big names that top the list of the failed acquisition strategies include Microsoft (Rosoff, 2011), Kmart, e-Bay, AOL, Daimler-Benz and Bank of America (Huffington Post, 2013) etc. In the similar context, the underlying report is aimed at assessing one of the biggest failed acquisitions from the successful technological companies. The case understudy is the e-Bay’s acquisition of the Skype in 2005 which ranks on the 4th among the top ten failed mergers and acquisitions list by The Huffington Post (2013). Section I of the report will provide theoretical review of mergers and acquisitions in a broader context Section II will discuss the case of e-Bay acquisition of Skype. The section will shed light on the different dimensions of the deal with a focus on the accounting treatment and consolidation of the financials. Furthermore, the discussion about the reason and evidence of failure will also be presented and assessed. 2. OVERVIEW OF THE ACQUISITION STRATEGIES AND THE REASONS BEHIND FAILURE Mergers and acquisitions hold a significant position in the management literature as it is one of the dominant strategies adopted for the growth. Mergers and acquisitions are strategies that result in the consolidation of the two companies. Merger results in the formation of the new company after the consolidation while acquisition is the purchase of one company by another and no new company comes into the establishment. Large number of objectives is defined in the management literature as well as practical examples; however, the most important and the primary motive behind every mergers and acquisitions is to gain the position where companies can create and exploit the potential synergies (Bohlin, Daley, & Thomson, 1998). With this primary motive, companies attempt to achieve any, few or all of the mentioned below motives (Bohlin, Daley, & Thomson, 1998): Expansion of the market share in terms of product, geography and customer base. Limitation of ground for the rivals Take-up of new products Expansion of the business competence (Bohlin, Daley, & Thomson, 1998) All mergers and acquisitions can be defined as the three staged process with each stage aimed at achieving the milestone towards synergy. The core of the process is depicted as follows: (Bohlin, Daley, & Thomson, 1998) Therefore, through these three stages the organizations’ achieve synergies. Example of synergy driving process from merging projects is depicted in the ...Show more


ASSESSMENT OF THE FAILED ACQUISITION OF SKYPE BY EBAY 1. INTRODUCTION Businesses in the contemporary business world are striving for growth and success in the deeply challenging environment. In such competitive environment, acquisition strategy is most seductive when corporate aims to boost the performance of the organization in the long term and at an inched pace…
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Merger and acquisition: a story of success and failure essay example
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