Since time Immemorial corporate restructuring has been seen to be an essential part of the corporate organisations which they implement in terms of financial and operational associations. These manifestations are done so as to ascertain various situations such as reviving the declining business, increasing the company’s value both in terms of market and shareholders and even helpful for preparing the company strong enough in terms of assets for its useful depiction into the predictable future years.
Corporate restructuring includes making dramatic changes of business by at times cutting down the integration of department or even spending more as per the criteria of increasing the proficiency and profitability of a business entity .Not only this, it is the corporate restructuring only that a helps the company’s to both attain and sustain business growth in terms to ascertain itself with competitive advantages over other companies
Mergers and acquisitions are the aristocratic distinctive of a corporate restructure!! Mergers and acquisition forms very important component of corporate restructuring.
To define a merger, it is a phenomenon in which two business firms of similar interest and nature come together over a voluntary manifestation in the pursuit of a new legal entity being formed post their amalgamation. Companies generally opt for a merger so as to gain market access or to come in a Limelight in order to depict that they have gained expansion in terms of both volume and value.
On the contrary talking about acquisition it is the process in which an existing company of high competence acquires the other company with the legal agreements. This leads to the formation of an acquirer firm grow even strong in its authorisation. The acquired firm on the other hand now essential comes under the management control of the Acquirer or the potential firm itself. More often these collaborations are intended with an action plans to anticipate the synergies among the various business firms coming together
Doomed merger and acquisition leading to drastic downfalls…
Despite of all the due diligence which the company takes in the case of these merger and acquisition of Paramount importance it is evident that challenges are also being faced on the same grounds. Purpose of merger and acquisition correspond to two main focuses. First, is to target the particular product, service or niche and second is to increase the profitability of the firm and at the same time to increase the initiation of potential of that particular structured framework. Whenever the focus of these two important parameters is being lost it lead to a failure that has to be devised with the concrete plan though but was implemented with a suitable control as it lacked integration which was necessary during the course of establishment. If the integration plan is not being properly executed these various failures of merger and acquisition can be seen in various respects such as leading to decrease the valuation of a company’s.
Weak corporate sector as well the existing business are being valued on the present visible financial numbers and assumptions with the possible forecast but in reality when the deal is done and how the strategies are carried forward plays an important role.
Probable reason for the failure of mergers and acquisitions: Perhaps in this current scenario merger and acquisition when laid down on the aspect ratio of execution and implementation have witnessed major stumbling blocks
Having said about the failures of mergers and acquisitions which even were strategically devised have taken aback and for the same. There are various reasons which accounts for the failure of these manifestations and venture and few of them are cited as:
- Most of the time it is has been seen that these ventures with the due course of time are unable in successfully validating the value creation to the particular target which they have been initiated for
- Another factor which could be considered as the various external factors of the business environment that has hit the business during the time of restructuring with some or the other reasons
- Lack of execution of a proper future focus layout which was established earlier
- Theoretical evaluation of a particular business went really opposite to its practical evaluation
- Negotiation errors overlapped the executions process
- Some losses of finances overseen during the course of corporate restructure
- Last but not the least one of the most common reason cited for the failure of merger and acquisition is that that more than 50% of the acquisition deal witness the drastic downfall because they do not have a better backup plan which could be engaged in a timely manner to avoid for the losses prevailing in the due course time of these declarations.
Having discussed briefly about the various aspects of corporate restructuring and the reasons and while is merger and acquisition fail the following is the drop down list of detrimental merger and acquisition held in the past years:
Microsoft and Danger Inc
Alcatel and Lucent
Toshiba and Westinghouse
eBay and Skype
Sprint and Nexte
MySpace and News Corp
Sears and Kmart
Cisco and Linksys
HP and Compaq
Credit Suisse and Donaldson, Lufkin & Jenrette
Terra and Lycos
AOL and Time Warner
Vivendi and Seagram
Deutsche Bank and Bankers Trust
Yahoo and Geocities
Daimler-Benz and Chrysler
Northern Telecom and Bay Networks
Mattel and the Learning Company
Novell and WordPerfect
BMW and Rover
Quaker and Snapple
Novell and UNIX
Borland and Ashton Tate
AT&T and NCR
Sony and Columbia Pictures
New York Central and Pennsylvania Railroad