M&A Approaches
The phrase Mergers and Acquisition (M & A) refers to the characteristic of corporate strategy, management and corporate finance dealing with the selling, buying and combining of different companies that can finance, aid or help a growing organization in a given industry to grow rapidly without having to create another business entity.
The Acquisition Integration Approaches model of David Jemison and Philippe Haspeslagh provided insight in Mergers and Acquisition (M & A) on finding the finest approach for the integration. In Mergers and Acquisition, the aim was traditionally “Make them like us”; relatively simple criteria were used to choose an approach such as the size and quality of the firm.
An Acquisition, which is, also known as a buyout or takeover is the buying of one company by another. Consolidation is when two companies combine to form a new company. An acquisition may be public or private. It generally refers to a purchase of a smaller company by a larger one. However, when a less significant or smaller organization acquires control of a larger company, this is known as reverse takeover. Although often used synonymously, the terms acquisition and merger mean slightly different. Merger happens when two companies agree to go forward as a single new company rather than remain se separately operated. This action is more precisely known as “merger of equals”. The firms are often of the same size.
Jemison and Philippe Haspeslagh stated that the approach a company should take towards integration should be understood by considering two criteria
- The need for strategic interdependence
- The need for organizational autonomy
Strategic interdependence
The central task in any acquisition is to create the value that is enabled when the two organizations combine. There are four types of value creation:
- Resource sharing
- Functional skills transfer
- General management skill transfer
- Combination benefits
Organizational autonomy
The strategic task of an acquisition is to create value and not grant autonomy too quickly. The need for organizational autonomy can be answered using three main questions:
Is autonomy essential to preserve the strategic capability?
How much autonomy should be allowed?
In which areas specifically is autonomy important?
Written by: Matt
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Tagged as acquisition integration, business entity, corporate finance, corporate strategy, creation resource, David Jemison, different companies, functional skills, general management, interdependence, jemison, larger company, management skill, merger, mergers and acquisition, organizational autonomy, Philippe Haspeslagh, reverse takeover, skill transfer, smaller company, strategy management, value creation + Categorized as Economy articles, Ladership & Management