Merger and Acquisition Strategies, Essay Example

Mergers and acquisitions can lead to potential growth and greater competitiveness. However, to make the M&A strategies to create continuous growth and increase the value provided for stakeholders is a challenging task for managers. In case of mergers, there are only a few examples of true mergers, when both companies deliver equal amount of benefits/market share.

There are several types of acquisitions: horizontal acquisitions happen when the two firms are in the same industry. Vertical acquisitions happen when suppliers or distributors are taken over by one of the companies. Related acquisitions are completed to add value to the current services of products provided for customers through the knowledge base of the other company.

There are several reasons why companies decide to implement an acquisition strategy. First, they can increase their market share and power. By buying a competitor, for example, the customer base and reputation can be increased in a short period of time.

Mergers and acquisitions have a lower risk compared to the investment required to develop new products. The market analysis and statistics of the other company are freely available for the other firm, therefore, they are able to work with ready data to create a strategy.

The main problems in the way of achieving success through acquisition can be difficulties in integration (location, management, culture), large debt, lack of synergy achieved, high level of diversification, the size of the company and inadequate target evaluation. Further, in several cases, managers can be overly focused on acquisitions and lose control over the original strategy of the firm.