INTRODUCTION
The implications of mergers and acquisitions are briefly discussed in this article, along with examples from current events. Its growth can be largely attributed to global collaborative ventures. Three different types of scientific investigations are of particular interest to those interested in merger-related antitrust concerns: share market occasion research, huge accounting information studies, and case studies that analyse specific mergers using either interview techniques or more unbiased, information premerger and incorrect due achievement reaches.[1] Past few years have seen unprecedented levels of acquisition and merger activity, in both terms of volume and dollar worth.[2] The legal concerns these deals generate grow increasingly complex and contentious as the incidence and costs of merger activity rise. Retention bonuses, poison pills, financing for junk bonds, greenmail, and lock-up options were practically unheard of just a few years ago. These vibrant concepts of art are currently being discussed widely and have become part of the everyday business vernacular.
Such actions generate issues with ramifications that go far beyond the takeover industry. In fact, these activities make us revaluate our core beliefs on the nature of the modern business, its place in society, and the most effective forms of corporate governance. While some constituents view acquisition activities as a danger, other assert that the procedure really results in significant gains.
MERGERS AND ACQUISITIONS MOTIVES
The pursuit of mergers could be motivated by a variety of factors. The most fundamental reason is that the acquiring firm views the acquisition as a profitable venture. Businesses will make acquisitions when doing so is the most profitable way to increase capacity, acquire new expertise or skills, expand into new markets or product lines, or reallocate assets to the best management or owners. As a result, a number of the same variables that affect significant investment choices also affect merger activity.[3] But not everyone agrees that mergers are an exception to the rule of business investment. For instance, Schiffman contends that while considering merger choices, managers infrequently take into account static cost reductions or price hikes. Instead, choices to combine are made as part of a larger strategy that aims to position the company to accomplish a lengthy objective.[4] General company investment is comparatively steady across time at the industry level, but merger activity is substantially more focused within shorter time frames. Andrade, Mitchell, and Stafford further point out that the reply period sees a concentration of merger activity because many of these transactions are a response to liberalization.[5]
MOTIVES OF JOINT VENTURES
Partners may establish inter-organizational ties for a variety of strategic reasons. In addition to helping businesses handle host national policies, joint ventures can promote entry into new product or geographic markets, help businesses improve or solidify their current market positions, and help businesses with managing risk. While there have been significant theoretical advancements in the joint venture literature over the decades in the study of the these inter-firm collaborative effort drivers, this has unluckily resulted in attributing one intent to making an investment firms, despite the fact that professionals may well have controlling various for entering into joint ventures.[6] Partly due to the difficulties in gathering such data, there is little prior empirical research that has offered a description of the various formation incentives that professionals may have concurrently to form joint ventures.
MERGERS AND AQCUISITIONS v. JOINT VENTURES
Whenever the targeted assets cannot be easily separated from the numerous other assets owned by the parent, joint ventures may be chosen. This is probably true if the fathers are numerous and not divisionally zed. Contrarily, acquisitions will be made when the founders are tiny or, if they are huge, when they are divisionalized into virtually autonomous units that can be acquired from the rest of the company. A joint venture is a useful tool for lowering these information costs because it enables either extra research into the partner’s asset value and very inexpensive dissolution of the partnership. Therefore, joint ventures must be favoured to acquisitions when the companies merging assets are in different industries and have little or no expertise of one another’s businesses.
WHY JOINT VENTURES HAVE AN EDGE OVER M&A DEALS
Historically, companies have looked to mergers and acquisitions as the sure-fire way to increase their power and influence. With the weight of complex legal ramifications and red tape that they carry, they are by no means the only (or best) option on the marketplace currently.[7] Admittedly, there is a version on mergers and acquisitions that removes the burden of accountability, the potential for downside, and the need for a significant amount of capital while still providing the benefits. However, during the past five years, joint ventures and strategic alliances have more than doubled while mergers have just increased slightly. Strategic alliances (or joint ventures) can be a partnership in which you join effort ranging from figuring out how to capitalize on the goodwill that a person has already built to finding a way to reclaim or remonetize their dormant customers — all for each business that provides part of the deal. It is a crucial tactic for attaining key resource, greater profits, and improved company franchise success. The connection will significantly improve your reputation, your presence, and how the market perceives your entity. There really are numerous advantages for all parties concerned.[8]
ANALYSIS OF THE BENEFITS ON FIRM PERFORMANCE
Making the choice between expanding your company through a M&A deal, a strategic partnership, or a joint venture can be challenging. Partnerships and M&A deals can expand businesses and give them access to fresh markets for their goods and services, but they can also present special difficulties. Although an acquisition gives the acquirer authority over the target, M&A deals can be expensive, and the buyer also takes on the enemy’s liabilities, which can be sizeable in some cases.[9]
On the other hand, business alliances might be a more decent option if acquiring the target may be too expensive even though they do not offer the same level of control. If an alliance or an acquisition is the greatest way for a business to achieve its development, it must be thoroughly considered. A M&A deal could bring the acquirer a piece of the target company’s business that is of little value or that would be more advantageous to sell off after the deal rather than incorporate it into the acquirer’s operations. It is crucial to assess whether a complete sale or spin-off is the best option to sell off a target’s company segments that are operating poorly or the acquisition doesn’t want them. Instead of selling the asset outright, it could be better to divest it into a joint venture, which keeps that element of the firm in the acquirer’s portfolio while bringing in a partner with industry knowledge to help improve the underperforming asset.[10]
CONCLUSION
Share price research frequently reveal that during the period of mergers and acquisitions, target firm investors experience big gains and acquiring firm shareholders experience little to no benefit. The total impact on shareholder value seems to be positive but modest, with hostile acquisitions financed with cash having a slightly bigger impact than friendly mergers financed with shares. The effectiveness and market dominance consequences of mergers and acquisitions have not been clearly addressed in large-scale studies of mergers based on premerger and post – merger financial reporting measurements. Recent merger research suggests that acquisitions may have firm-specific implications on industry pricing. In other words, even if the merger has no impact on the market structure, the qualities of the buying entity may still be significant. I really believe that you owe it to yourself to maximize every opportunity. The next idea is crucial if you accept this claim. You see, until you are aware of all your alternatives, you cannot really make the most of what you do. That is the main focus of this inventory.
Author(s) Name: Aadrika Malhotra (GURU Gobind Singh Indraprastha University)
References:
[1] M. Pervan, ‘The impact of M&A on company performance: Evidence from Croatia’ (2015) 23 Procedia Economics and Finance 1451
[2] M. Conyon, ‘The Impact of Mergers and Acquisitions on Company Employment in the United Kingdom (2002) 46 Eur. Econ. Rev. 31, 32
[3] J. Weston, Mergers, restructuring, and corporate control (Prentice-Hall International, 1990)
[4] D. Scheffman, Twenty Years of Merger Guidelines Enforcement at the FTC: An Economic Perspective (1993) 4 Antitrust Bull. 715
[5] G. Andrade, ‘New Evidence and Perspectives on Mergers’ (2001) 15 J. Econ. Persp. 103
[6] Micheal Nippa, ‘On the future of international joint venture research’ (2019) 50 J. Int. Bus. Stud. 555
[7] J. F. Hennart, The Choice Between Mergers/Acquisitions and Joint Ventures (1997) 18 Strategic Management Journal 1,4
[8] J. J. Reuer, The Choice Between Joint Ventures and Acquisitions: Insights from Signaling Theory (2012) 23 Organisation Science 1190
[9] Henry W. Nichols, Joint Ventures (1950) 36 Va. L. Rev. 425
[10] Mechem, The Law of Joint Adventures (1931) 15 Minn. L. Rev. 644
