The article seeks to demonstrate an understanding of the effects of Mergers and Acquisition on shareholder's value creation. It is very obvious that there will be a change in the income of the shareholders, whether it is positive or negative, whenever there is a merger of the concerned firm. A merger or an acquisition deal can only be justified if it adds value to the company and hence to the shareholders. To analyze this effect, several examples of mergers and acquisitions which have taken place in the past will be taken into consideration. Furthermore, this article stresses attention on the factors which are required in order to add value through mergers.
In order to analyze the importance of organizational fit in an M&A deal, two main examples are to be taken into consideration. The first one is the acquisition of Snapple Beverage Co. by Quaker Oats, in 1994. The second is the merger between Daimler-Benz and Chrysler in 1998. Both of these deals failed due to problems with organization fit. Organizational culture of these companies is to be considered individually and the reasons which caused the conflict, after the deal, is analyzed. Several scholarly studies are to be taken into account in order to provide an understanding of the importance of a balance between ‘strategic' and ‘organizational' fit in Mergers and Acquisitions and the appropriate strategies which needs to be put in place in order to avoid any cultural conflict after the merger.
Despite the fact that several studies indicate the lack of strategic fit and poor management of the integrative process as the central grounds for disappointing performance, organizational fit is another important aspect of these failures which is usually not stressed upon when the deal is being considered. Even with their attractiveness and significance, research shows that a lot of mergers and acquisitions do not produce the economic benefits predicted or preferred for the acquiring firm.
Though the primary data through sponsored study by contacting various subjects through personal interviews and questionnaires is ideal for the sake of hands on or first hand experience, due to paucity of time and limited scope of this opportunity, the secondary data alone is relied upon for the study. Nevertheless, this type of study as many scholars do is no less reliable as they are invariably supported by their own primary data.
The importance of organizational fit can be examined in the research. It has been seen that the reason why most of the mergers and acquisitions do not live up to the shareholders' expectations is due to problems with organizational fit among the companies involved. The questions which are to be stressed are: What are the factors involved in organizational fit between the two firms which are considering a merger or an acquisition? What are the consequences of organizational non-fit on mergers and acquisition deals? What steps need to be taken, when the deal is being considered, in order to get a good organizational fit?
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