...Completed the 14th of June 2014 1 Preface: The copyright of the Master thesis rests with the author. The author is responsible for its contents. RSM is only responsible for the educational coaching and cannot be held liable for the content 2 Contenu 1. Introduction .................................................................................................................................................... 5 2. Literature review ........................................................................................................................................... 9 2.1 International mergers and acquisitions ................................................................................................. 9 2.2 Mergers and acquisitions’ experience and performance implications .......................................... 10 2.3 The impact of the type of distance on the merger and acquisition’s learning process ............................. 12 2.3.1 Cultural distance............................................................................................................................... 12 2.3.2 Administrative distance ................................................................................................................... 13 2.3.3 Geographic distance ......................................................................................................................... 14 2.3.4 Economic distance ............................................................
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...1 ACQUISITIONS AND TAKEOVERS When analyzing investment decisions, we did not consider in any detail the largest investment decisions that most firms make, i.e., their acquisitions of other firms. Boeing’s largest investment of the last decade was not a new commercial aircraft but its acquisition of McDonnell Douglas in 1996. At the time of the acquisition, Boeing's managers were optimistic about the merger, claiming that it would create substantial value for the stockholders of both firms. What are the principles that govern acquisitions? Should they be judged differently from other investments? Firms are acquired for a number of reasons. In the 1960s and 1970s, firms such as Gulf and Western and ITT built themselves into conglomerates by acquiring firms in other lines of business. In the 1980s, corporate giants like Time, Beatrice and RJR Nabisco were acquired by other firms, their own management or wealthy raiders, who saw potential value in restructuring or breaking up these firms. In the 1990s, we saw a wave of consolidation in the media business as telecommunications firms acquired entertainment firms, and entertainment firms acquired cable businesses. Through time, firms have also acquired or merged with other firms to gain the benefits of synergy, in the form of either higher growth, as in the Disney acquisition of Capital Cities, or lower costs. Acquisitions seem to offer firms a short cut to their strategic objectives, but the process has its costs. In this chapter,...
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...that are required for the business to perform its functions, and to generate profits. The Acquisition of Kia Motors by Hyundai Motors Fikre Y. Wondimu CalUniversity Author Note Fikre Y. Wondimu is a student at California Intercontinental University. Special thanks to Dr. Troy Roland and Dr. Fathiah Inserto for providing suggestions to improve this document format and content. Correspondence concerning this thesis should be addressed to Fikre Y. Wondimu, CalUniversity, 1470 Valley Vista Drive #150, Diamond Bar, CA 91765. Contact: fikre_y@yahoo.com Abstract The last decade demonstrated decreased revenue and higher value of development costs, which led the automobile industry to engage in domestic and international mergers and acquisition (M&A). This case analyis examines one of the largest M&As in the Korean automobile industry in recent years, the acquisition of Kia Motors (Kia) by Hyundai Motors (Hyundai). The case study briefly analyses the conditions of the acquisition, the integration and stabilization processes undertaken by both companies. By acquiring Kia, Hyundai enhanced its competitive position in both domestic and global markets, achieving economies of scale, scope and strengthened its local and global market. The M&A process of Hyundai/Kia did not come easy. The Post-acquisition and restructuring process faced several challenges of synergy effects prompting for strategy change in order to align with market trends in the domestic and global...
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...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between two large...
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...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between...
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...THE EFFECTS OF MERGERS AND ACQUISITIONS SUMMARIZED PAPER This paper examines the impact of Merger & Acquisitions on performance suffer from several key theoretical and empirical limitations. This paper also has shown some new evidence regarding the effects of different types of mergers and acquisitions on employees. It also provides a foundation for future theoretical and empirical M&A integration research. The resurgence in mergers & acquisitions, and divestitures has focused greater attention on assessing the impact of these transactions on organizations and workers. Theoretically, Employees who are involved and are part of any Merger & Acquisitions are very well look around and see the effects on their current and future role. Most of the time panic mode starts amongst all the employees and they look the criteria where they may fit in the future upcoming merged organization. Empirical analysis is based on a rich matched employer employee dataset, which combines data on millions of Swedish workers and information on 16,000 Swedish manufacturing plants for the years 1985-1998. The data shown in this article go thru the complete effects of mergers and acquisitions on firm performance, plant productivity, levels of employment, and compensation. There are various methods along with data gathering shows in this article how it co-relates all the parties and component involved during any merger and acquisitions. Employment status change is something that...
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...Merger: Valuation Process and Evaluation of Financial Performance in case of United Insurance Company and Shama Plc By: Jemaneh Bayou January 2008 Advisor: Abebe Yitayew (Asst. Professor.) A PROJECT PAPER SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES OF ADDIS ABABA UNIVERSITY IN PARTIAL FULFILLMENTS OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN ACCOUNTING AND FINANCE ADDIS ABABA UNIVERSITY SCHOOOL OF GRADUATE STUDIES Faculty of Business & Economics Department of Accounting & Finance Merger: Valuation Process and Evaluation of Financial Performance in case of United Insurance Company and Shama Plc By Jemaneh Bayou Hailu January 2008 Approved by board of examiners Asst. Professor Abebe Yitayew Advisor Examiner ___________________ Signature ___________________ Signature Examiner ___________________ Signature Statement of Certification This is to certify that Jemaneh Bayou has carried out his project work on the topic “Merger: Valuation Process and Evaluation of Financial Performance in case of United Insurance Company and Shama Plc” under my supervision. In my opinion, this work qualifies for submission in partial fulfillment of the requirements for the award of Degree of Masters of Science in Accounting and Finance. Signature________________ Abebe Yitayew (Asst.Professor) Project Advisor Statement of Declaration I declare that this project work is my original work. It has not been submitted for any degree/Diploma in any University. I have undertaken...
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...Mergers and Acquisitions Basics Mergers and Acquisitions Basics All You Need To Know Donald DePamphilis Amsterdam • Boston • Heidelberg • London New York • Oxford • Paris • San Diego San Francisco • Singapore • Sydney • Tokyo Academic Press is an imprint of Elsevier Academic Press is an imprint of Elsevier 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA Elsevier, The Boulevard, Langford Lane, Kidlington, Oxford, OX5 1GB, UK Copyright © 2011 Elsevier Inc. All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher. Details on how to seek permission, further information about the Publisher’s permissions policies and our arrangements with organizations such as the Copyright Clearance Center and the Copyright Licensing Agency, can be found at our website: www.elsevier.com/permissions. This book and the individual contributions contained in it are protected under copyright by the Publisher (other than as may be noted herein). Notices Knowledge and best practice in this field are constantly changing. As new research and experience broaden our understanding, changes in research methods, professional practices, or medical treatment may become necessary. Practitioners and researchers must always rely on their own experience and knowledge...
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...1 The Value of Synergy Aswath Damodaran Stern School of Business October 2005 2 The Value of Synergy Many acquisitions and some large strategic investments are often justified with the argument that they will create synergy. In this paper, we consider the various sources of synergy and categorize them into operating and financial synergies. We then examine how best to value synergy in any investment and how sensitive this value is to different assumptions. We also look at how this synergy value should be divided between the parties (or companies) involved in the investment. We conclude with an empirical examination of how much synergy is actually created in corporate mergers, and how much is paid. Synergy, we conclude, is so seldom delivered in acquisitions because it is incorrectly valued, inadequately planned for and much more difficult to create in practice than it is to compute on paper. 3 When Carly Fiorina argued for Hewlett-Packard’s acquisition of Compaq, she offered a number of of reasons the deal made sense. She noted that the combined company would be able to meet the demands of customers for “solutions capability on a truly global basis.” She also claimed that the firm would be able to lead with its products “from top to bottom, from low end to high end.” As her crowning argument, she claimed that the merger made sense because it would create “synergies that are compelling.” Synergy, the increase in value that is generated by combining two entities...
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...Do Bank Mergers Create Shareholder Value? An Event Study Analysis Varini Sharma Introduction to Econometrics December 17, 2009 Professor Gary Krueger Macalester College I. Introduction Since the 1980s, the U.S. banking industry has experienced a large increase in the level of mergers and acquisitions. Between 1980 and 1998, approximately 8,000 bank mergers occurred, involving about $2.4 trillion in acquired assets that can be attributed to deregulation in the1980s and the removal of legal restrictions on intrastate and interstate banking (Rhoades, 2000). One basis for these mergers is the assumption that such consolidations lead to improvements in efficiency and profits amassed through increased market power, economies of scale, reduced earnings volatility, diversification, and other financial and operational synergies. While proponents of bank mergers argue that these gains are substantial, Coase (1937) tells us that tradeoffs exist between economies of scale (size) and ability to manage. In addition to the significant increase in mergers we have witnessed the collapse of countless financial institutions in the past 3 years due to bad lending practices. While the Coase theory applies to firms in general, how well does it apply to financial institutions? Additionally, has the increased size of financial institutions contributed to the financial crisis of 2008? This paper investigates the economic role of bank mergers in creating shareholder...
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...CURRENT ISSUES SERIES Mergers & Acquisitions: Organizational Culture & HR Issues Deborah A. Pikula IRC Press Industrial Relations Centre Queen’s University Kingston, ON K7L 3N6 Tel: (613) 533-6709 Fax: (613) 533-6812 E-mail: ircpress@post.queensu.ca Visit our Website at: http://qsilver.queensu.ca/irl/qsirc/ Queen’s University ISBN: 0-88886-516-3 © 1999, Industrial Relations Centre Printed and bound in Canada Industrial Relations Centre Queen’s University Kingston, Ontario Canada K7L 3N6 Publications’ Orders: 613 533-6709 Canadian Cataloguing in Publication Data Pikula, Deborah A. Mergers & acquisitions : organizational culture & HR issues (Current issues series) Includes bibliographical references. ISBN 0-88886-516-3 1. Personnel management. 2. Corporate culture. 3. Organizational change. 4. Consolidation and merger of corporations. I. Title. II. Series: Current issues series (Kingston, Ont.). HF5549.P469 1999 658.3 C99-932294-X Executive Summary Mergers and acquisitions are increasing in North America as organizations try to expand their operations and increase their competitive advantage. But despite optimistic expectations, mergers and acquisitions frequently fail, in part because managers neglect human resource issues, which are rarely considered until serious problems arise. This study highlights the importance of proactive management of human resource issues, concurrently with financial issues, and offers detailed practical advice to help ensure...
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...CURRENT ISSUES SERIES Mergers & Acquisitions: Organizational Culture & HR Issues Deborah A. Pikula IRC Press Industrial Relations Centre Queen’s University Kingston, ON K7L 3N6 Tel: (613) 533-6709 Fax: (613) 533-6812 E-mail: ircpress@post.queensu.ca Visit our Website at: http://qsilver.queensu.ca/irl/qsirc/ Queen’s University ISBN: 0-88886-516-3 © 1999, Industrial Relations Centre Printed and bound in Canada Industrial Relations Centre Queen’s University Kingston, Ontario Canada K7L 3N6 Publications’ Orders: 613 533-6709 Canadian Cataloguing in Publication Data Pikula, Deborah A. Mergers & acquisitions : organizational culture & HR issues (Current issues series) Includes bibliographical references. ISBN 0-88886-516-3 1. Personnel management. 2. Corporate culture. 3. Organizational change. 4. Consolidation and merger of corporations. I. Title. II. Series: Current issues series (Kingston, Ont.). HF5549.P469 1999 658.3 C99-932294-X Executive Summary Mergers and acquisitions are increasing in North America as organizations try to expand their operations and increase their competitive advantage. But despite optimistic expectations, mergers and acquisitions frequently fail, in part because managers neglect human resource issues, which are rarely considered until serious problems arise. This study highlights the importance of proactive management of human resource issues, concurrently with financial issues, and offers detailed practical advice to help ensure...
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...on the Determinants of Acquisitions Nigel Garrow Introduction Merger and acquisition (M&A) activity is a significant factor in business in most advanced economies. According to Thomson Reuters, the value of M&A deals completed globally during the 12 months to November 2009 was US$1.8 trillion. However, the acquirers’ shareholders often lose value. Much of the literature on M&A is centred on the UK and US markets, with only a modest level of research within Australia This paper suggests a new proposition to explain why M&A activity may be value destroying for the acquirers: Success or failure for the acquiring firm’s shareholders in M&A is a function of the combined tenure, personal motivation, and recent performance of the Chairman and Chief Executive Officer (CEO) of the acquiring firm. This examination of the combined effectiveness of the Chairman and CEO is not something that appears to have been undertaken before. The paper will present the constituent hypotheses of the main proposition, followed by a literature review, a presentation of findings from a pilot study, conclusions and next steps. Four constituent hypotheses, each of which refers to the performance of the Chairman and CEO, arise out of the pilot study: Hypothesis 1. The length of time that the Chairman and CEO of the acquiring firm have been together in their respective positions at the time of the acquisition will determine the success or otherwise of the outcome of the acquisition. Page | 38 Proceedings...
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...New Evidence and Perspective on Mergers – A One Page Summary The authors of this article have provided further evidence on the value of mergers and acquisitions by updating the database to include facts for the 1990s to empirical research. They came to a conclusion that mergers seem to create shareholder value, with most of the gains accruing to the target company. In arriving at their conclusion, they reviewed issues on why mergers occur. They reviewed reasons for merger that appear to be more relevant in certain time periods. They argue that industries tend to restructure and consolidate in concentrated periods of time, that these changes occur suddenly, and that they are hard to predict. However, they state that explaining the long-term effects of mergers, and what makes some successful and others not, is still a question that remains largely unanswered. They also identify that, although merger and acquisition activity, occurs in readily identifiable waves over time, these waves are not alike. In fact, the identity of the industries that make up each merger boom varies tremendously. After identifying why and how mergers occur, the authors go ahead to identify winners and losers in the merger game. They identify that the most statistically reliable evidence on whether mergers create value for shareholders comes from traditional short-window event studies. The authors argue that the target firms consistently have abnormal returns of 16% in the announcement period across decade...
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...Financial Management Lecturer: Anh Tran Coursework 1 – Case 5 – 24/11-‘13 Andre Deimling Arman Gabass Carl Dahl Enrico Mellis Philip Koenig General Electric’s Proposed Acquisition of Honeywell General Electric’s Proposed Acquisition of Honeywell Investment Decisions Analysis of Investment Decisions Analysis of Table of Contents Executive Summary 2 Strategic Considerations 4 Political Complications 4 Personalities Involved 4 Valuation Methods 5 Early Closing of Positions 6 Situation Analysis 6 Investments Effects on Closing Positions on the 1st March 2001 7 Late Closing of Position: 8 Investments Effects on Closing Positions after the 1st July 2001 8 Arbitrage Spread 9 Conclusion 11 Executive Summary The proposed merger between General Electric (GE) and Honeywell has been praised by the Companies and up until 1st of March 2001 been called “the cleanest deal you’ll ever see” by Welch, CEO of GE. On the 1st of March the antitrust regulator, The European Commission (EC), announces that they will perform a full review over the potential merger. If GE were to acquire Honeywell, they could become a dominant player in the Aerospace industry. This fact is underlying reason for EC’s review as their main objectives are to prevent market dominance, as effects of un-proportional market shares, and by that stimulate efficient competitive markets. This announcement introduce large factors of risk that needs to be considered by Gallinelli,...
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