Capstone Research Paper (Simpson)

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Wilson 1
The World of Mergers and
Acquisitions
Capstone Research Project
Morris College
Nicholas Wilson

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Table of Contents
Page 3................................................................................................................................. Abstract
Page 4......................................................................Thesis Statement, Methodology, Introduction
Page 5................................................................................ Definition of Mergers and Acquisitions
Page 7............................................................................................Reasons Why Companies Merge
Page 10....................................................................................................How Mergers are Formed
Page 12...................................................................................................................Vertical Mergers
Page 15..............................................................................................................Horizontal Mergers
Page 16....................................................................................................Market Extension Merger
Page 17...................................................................................................Product Extension Merger
Page 18..........................................................................................................Conglomerate Merger
Page 20..........................................................................................Examples of Successful Mergers
Page 21......................................................................................Examples of Unsuccessful Mergers
Page 24...................................................................................................................................Charts
Page 30..........................................................................................................Regulation of Mergers
Page 31........................................................................................................Problems with Mergers
Page 32..........................................................................................Recommendations and Conclusion

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Abstract
The purpose of this research paper is to describe the attributes of Mergers and
Acquisitions. There are many different area to explore when talking about Mergers and
Acquisitions. First, I will explain what is meant by the words "Mergers" and "Acquisitions."
Another important topic that I will discuss is the reasons why companies merge or acquire
other companies. I will break down the process of these combination of entities. While on this
topic, I will reveal what is necessary for a company to merge with another company or for a
company to acquire another company. Also talked about in this essay are the different types of
Mergers and Acquisitions. There are variety of ways that companies can become one entity.
Another topic worth discussing is the regulation that is involved with mergers and acquisitions.
What are the laws and why are they in place? There will also be some examples given of
famous merger and acquisitions of today and yesterday.

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Thesis Statement
Although the terms mergers and acquisitions are used to describe the combination of
two companies to form a new single company, there are many different distinct types of
mergers and acquisitions. Although a mergers and acquisitions are sought by companies to
achieve some advantage, there are a number of other reasons that a company may want to
give up its independence.
Methodology
This research was conducted through the use of internet sources. Information was
gathered from online articles, online databases, and online reports.
Introduction
The history of mergers and acquisitions first began during the 19th century. This period
was anti-competition and consisted of mergers that were between companies that enjoyed
control over their respective markets. A majority of the mergers that took place during this time
period were horizontal and they took place in the metal, steel, and constructions industries.
During the first decade of the 20th century, a majority of the mergers that took place were
unsuccessful. The deals that took place during this time period failed because of their inability
to attain the competence to keep the new businesses running. The stock market crash of 1904
was preceded by the crash of the world's financial system in 1903. After the crash, the apex
judiciary body, another name for the Supreme Court, regulated mergers by issuing a law that

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allowed mergers to be competitive; the law also stated that mergers could be de-merged by
the Sherman Act, which was an act to encourage competition or to prevent monopolies. The
concentration of the 1916 through 1940 period were mergers between oligopolies, which are a
few small firms that dominate a market. Oligopolies were the focus of this period as opposed to
anti-competitive firms. This new wave of mergers and acquisitions was a result of the financial
boom that occurred as a result of World War I. This new world of mergers lead to
developments in the science and technology industries. It also lead to many new infrastructure
firms that helped develop railroads and automobile transportation. Many financial companies
such as banks were an important factor in the new found success among mergers and
acquisitions. This twenty plus year period ended with the sharp decline of the stock market that
lead to the Great Depression. During the 1960's, a majority of the mergers were horizontal
mergers. These mergers happened because of elevating stock and interest rates, but they were
also a result of anti-trust rules and regulations. The 1970's also saw mergers that performed
effectively. Examples of effective performing companies were INCO merging with EXB, and OTIS
Elevator merging with United Technologies. The period of 1992 to the present day has seen
acquisitions that were much larger in size than acquisitions of the previous years. Certain
industries such as the oil, gas, pharmaceuticals and banking industries began to merge with
international companies that were in their respective industries. Anti-acquisition regulations
were also introduced during this period.
Mergers and acquisitions are two terms that are used to describe combination of two or
more companies or organizations. These companies find it necessary to add more employees or
capital to their current business. A merger takes place when two or more companies combine

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their operations into a single entity. This happens because the stockholders of one company are
offered securities is exchange for their share in the company that is being acquired. Mergers
are used by companies to expand their operations often to increase their long term
profitability. The least important company loses its identity and becomes a part of the more
important corporation, which maintains its identity. A merger ends the company that is being
absorbed, and the surviving company assumes all the rights, privileges, and liabilities of the
absorbed company. A merger should not be confused with a consolidation, in which two
corporations lose their separate identities and combine to form a completely new company. An
acquisition is a process in which a company takes to buy most, if not all, of the target
company's ownership stakes in order to assume control of that firm. Acquisitions are also
known as takeovers. In an acquisition, a company purchases another company, and obtains the
right to sell off operations, merge them into their company, or close facilities or cancel products
altogether. Acquisitions are sought after by companies as a method to grow. This allows a
company to takeover a target company's operations and niche. Acquisitions are seen as more
beneficial than expanding its own operations. An acquisition is often paid either in cash, the
acquiring company's stock, or a both. Acquisitions can be either friendly or hostile. A friendly
acquisition occurs when a firm agrees to be acquired. On the flip side, hostile acquisitions don't
have the same agreement from the target firm. In a friendly acquisition, the companies
cooperate in negotiations. In a hostile takeover, the target company is unwilling to be acquired
or the target's board has not been previously notified of the offer. The company that seeks to
acquire another company must buy large stakes of the target company the obtain a majority
stake. In either case, the acquiring company often offers a premium on the market price of the

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target company's shares in order to coerce the shareholders to sell. News Corp., for example,
bid to acquire Dow Jones with a 65% premium over the stock's market price. A acquisition or a
merger usually begins with discussions between the boards of each company. Next, they have a
formal negotiation, then followed by a letter of intent, due diligence, and a purchase or merger
agreement. Finally, the deal and the transfer of payment takes place. These transactions can be
complex, and they can take a long time to come to fruition. For these reasons, companies will
hire investment bankers or other financial experts to handle mergers and acquisitions.
After learning what mergers and acquisitions are, one might wonder why companies
merge in the first place. There are various reasons as to why companies merge. One reason is
that the combined corporation would be larger, and it would also have larger resources for
marketing, product expansion, and obtaining financing. The newly formed company would have
a better chance at competing in the marketplace. Another reason why companies merge is so
that the combined company could merge their operations to reduce costs. Companies might
also choose to combine the production areas if the companies produce similar products, and
therefore reduce costs by having fewer plants or facilities to operate with. Also, the newly
formed company might have as much competition in the market. If the two companies
competed for customers, they could combine their products and services and use resources for
improving those products and services, rather than marketing against each other. Another good
reason for a merger between two companies is that the combined company would create
synergy. Synergy is the potential financial benefit that is achieved through the combination of
companies. Synergy is often a driving force behind a merger. Business will naturally want to
merge with another business that has complementary strengths and weaknesses. The synergy

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achieved through the merger can be attributed to various factors, such as increased revenues,
combined talent and technology, or cost reduction. The question of why another company
would want to buy another company may arise. Well, to answer that question, the goal of any
business in a capitalist society is to obtain revenue. The act of buying another company would
help accomplish this goal. Mergers is also a strategy that companies use to obtain
diversification. "Diversification is the reduction of risk through investment decisions (Peavler
1)." If a large firm believes that it company is at risk because it only has a presence in a single
industry, it may buy a business in another industry. This would create more diverse economy
for the acquiring firm. To put it in simpler terms, the acquiring firm no longer has all its eggs in
one basket. There are also other aspects of diversification that may cause firms to merge. If a
firm were to merge with or acquire a firm in another country, there may be a reduction in risk
of operating in the domestic country. This is all due to the diverse economic and political
climate. There is also the benefit of reducing foreign exchange risk and localized recessions.
Another reason that firms decide to merge is for better financing. A company may look to
merge with or be acquired by another company if it is struggling financially. If the company
cannot find another company to merge with, than it would have to go out of business or file
bankruptcy. A larger firm would have more accessibility to financing than smaller firms. The
new entity formed by the merger may allow the firm to access debt and equity financing that
was not a possibility before the merger. There are also tax advantages associated with mergers.
One advantage in particular, is called a tax loss carry forward. This meaning that if one of the
firms had a negative gain in revenue before the merger, then that number would be offset
against the profits of the firm that it had merged with. This is a very significant benefit to the

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newly merged firms. If two firms merge that are in the same industry merge together, then it
may result in operating economies. Functions that would normally be duplicated, such as
purchasing, marketing, and accounting may be eliminated because of the newly formed
company. The day-to-day functions of a business could be a financial burden for small firms.
The new firm that is created from the merger or acquisition will be in a better financial position
to afford the everyday functions of the firm. The attainment of economies of scale is also
another reason for mergers and acquisitions. "Economies of scale simply means that the cost
of doing business, whether in manufacturing or the aforementioned operating economies, will
be lower in the combined business firm (Peavler 2)." If the producers are able to lower the cost
of doing business, than the price that consumers will pay will be lowered as well. The thinking,
in one camp, is that if the cost of doing business is lower, that cost will be passed on to the
consumer, resulting in a win-win situation. A company may view mergers and acquisitions a
means of increasing its capabilities. The increased capabilities may be a result from the
expanded research and development or the increased manufacturing as result of the merger.
Another reason for merger is to gain a competitive advantage. A company wants to obtain
better distribution and marketing networks. A more advanced marketing and distribution
network will give both companies a broader consumer base almost instantly. Firms also look to
sharpen their business focus. Companies will merge with other companies that have more
market penetration in a key areas of operations. Businesses merge to increase supply-chain
Pricing power. If a firm buys out a supplier or distributor, then the firm can lower costs. Buying
out a supplier means that a firm, it is able to save money on shipping cost that the suppliers
were previously taking away. Buying out a distributor means that a firm may be able to ship its

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products at a lower cost. The elimination of competitors is also another motive for merging
with another firm. Mergers and acquisitions make it possible for the acquirer to eliminate its
competitors and it also allows the firm to increase its market share. The negative part of this is
that a large premium is needed to get the target company's shareholders on board with the
deal. Replacing leadership is also another motivation that leads to a merger. In private
companies, the company may need to merge or be acquired if they cannot decide on who shall
take over the company once the owners retire. Sometimes a company may choose to merger in
order to stay afloat in the global marketplace. For a company to surrender its identity to
another company may be one of the most difficult decision that a business has to make, but it
may sometimes be the only option for survival. Many companies used mergers and acquisitions
to survive during the Great Recession of the late 2000s. During this time, many banks merged in
order to keep from being forced to close.
Another good question that should be answered is what goes in to making a merger
come to fruition. A merger is the result of a company seeking benefit from the combination of
its company along with another company, in order to increase its shareholder value. Thinking
logically, a merger of two similar sized companies would combine their stocks into a new
company. But, in reality, the two companies make an agreement that one company will buy the
other's stock form the shareholders in exchange for their own stock. As a shareholder in the
company, the decision of whether or not the company decides to merge with another company
is partially up to you. The voting process for a public company usually involves a shareholder
voting in favor of the merger. A merger could be a great financial opportunity or it could be
disastrous. An analysis must be done in order to draw a conclusion about the possible decision.

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As a shareholder, using the shares that you own is a good way to help making a decision for the
company. Shares are not the only important factor in making decisions like this. The impact that
is made on the community as a result of a merger between two companies is also very
important. The merger could result in a loss of jobs in the community. The other company
participating in the merger could have some practices that may be unethical. As a investor, it is
crucial that a company makes money. After all, that is why a company exists, to make money.
Even though money is a big part of the deal, the non-financial factors could also be big enough
to become deal breakers. Being familiar with the financial reports are also a crucial part to any
deal. To decide whether to go forward with the deal or not, look over the company if you are
not familiar with their financials. If the financials are not good, then there is a great chance that
the newly formed company will not be any better. It is important to look at the most recent
financial statements and reports when looking at the two companies involved in the merger.
While it may not be the most exciting thing, knowing the financial state of a company that is
involved in the merger is very important; after all, their financial state will soon become your
financial state. The newly formed company will have some changes that are different from the
companies that formed it. The faces that are in the leadership position will be one of the most
common changes. Leadership positions such as the members on the board of directors and the
executives in the company may not change at first, but may change soon after the formation of
the new company.

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Merger is a term used to define the formation of two or more companies into one
identifiable company. While any combination of companies can be called a merger, there are

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many different types of merger with very distinct characteristics. One type of merger is called a
vertical merger. A vertical merger is a merger between two different companies that produce
different goods or services for one specific finished product. A merger like this occurs when two
or more companies that have operations on a different level of the supply chain in a certain
industry, merge their operations together. The reason for mergers are to create synergy
between two companies and make their operations more efficient by becoming one entity. By
directly merging with suppliers, a company can increase its revenue and decrease its reliability
on an outside source. Reducing operating costs and increasing profitability is the goal of a
vertical merger. The reason that a company may want to merge with a supplier is to obtain
access to raw materials. Vertical mergers can be very instrumental in obtaining important
supplies. They are also very instrumental in helping to reduce overall costs through the
elimination of finding suppliers, negotiating deals, and paying premium market prices. This type
of merger also improves efficiency through the synchronization of products and supplies
between the two companies. This helps ensure that supplies are available when the company
needs them. A vertical merger if also very effective in dealing with competition. This type of
merger makes it difficult for competitors to access important supplies. This also weakens
competitors and created barriers to competitors looking to enter into the market. A good
example of a vertical merger would be a car manufacturer that purchases a tire company. This
type of merger helps the car manufacturer by reducing the cost of tires and can expand
business of supplying tires to competing automakers.

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Another type of merger is called a horizontal merger. A horizontal merger is a merger
that occurs between companies in the same industry. A horizontal merger can be described as a
consolidation that is formed from two or more firms that operate in the same space. These
companies are often competitors that offers similar products or services. The two companies
that seek merge into a single entity serves the same market, which makes the merger
horizontal. These types of mergers a more common in industries with a few firms. This is
because there is more competition and synergy and potential gains in market share are greater
for merging firms in this particular industry. Because of the amount of companies try to achieve
an economy of scale, horizontal mergers occur most often. The merger of Daimler-Benz and
Chrysler is a very good example of a horizontal merger. A company can obtain a larger share of
the market if the company that they merge with sells similar products and services. You can
offer a broader range of products to consumers, if the other company sells complementary
products. When a company merges with another company that offers different products to a
market segment that is different from the market that they are in, then it becomes possible to
diversify and enter entirely new markets. Increasing profits and offering new products to
customers is the goal of a horizontal merger. There is no need to spend resources in order to
invent new products. Selling your products to different geographic regions become a possibility
when a horizontal merger occurs. The distribution centers and customers that were not
previously yours, you obtain through the merger. Reducing the threat of competition is also a
possibility as a result of a horizontal merger. This newly formed company had access to more
resources and a larger market share, which allows this new company to achieve a greater
economy of scale.

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Another type of merger is a market extension merger. This type of merger is the result
of two companies that produce the same products, but in two different markets. For example,
when two different financial firms that offer the same product of service agree to merge their
operations together, it is because they want to make a presence in a larger market. The goal of
market extension mergers are to enter into a larger market. By entering into a larger market, a
company had access to a larger consumer base. It is very important that when a market
extension merger is established between partners, that both companies learn to coincide with
each other when their different environments merger together. When a small firm merges with
a company that is larger, their different beliefs and ways of conducting business can clash. This
can hinder that company's success. Besides, what made a smaller company successful, may not
help a larger, newly merged company succeed in the market.
The acquisition of Eagle Bancshares by RBC Centura is a very good example of a market
extension merger. Eagle Bancshares was a company that was headquartered in Atlanta. The
company was home to more than 200 employees. Eagle Bancshares was a firm that had 90,000
accounts and had approximately $1.1 billion in assets to its credit. The bank held Tucker Federal
Bank, which is a company that held the title of being one of the largest banks in Metro Atlanta
in terms of deposit market shares. What makes this acquisition so significant is that it allowed

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RBC to grow its operations in the United States market. This acquisition was vital in aiding RBC
Centura to move into the Atlanta market, a market that is a leader in the United States financial
market.
Product extension mergers are also another type of merger; but unlike market
extension mergers, product extension mergers are mergers that occur when two companies
that deal with products that are somehow related to each other and that also operate in the
same market merge their operations together. This type of merger helps companies to combine
their respective products in order to obtain a larger consumer base. The company, in turn,
makes a higher profit.
An example of a product extension merger would be the acquisition of Mobilink
Telecom Inc. by Broadcom. Broadcom is a company that manufactures Bluetooth personal area
network hardware systems and chips for IEEE 802.11b wireless LAN. Mobilink Telecom Inc. is a
company that manufactures product designs for handsets that are equipped with the Global
System for Mobile Communications technology. Mobilink is on its way to being certified to
manufacture wireless networking chips that are equipped with high speed and General Packet
Radio Service technology. The new products at Mobilink would complement the products of
Broadcom.

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A conglomerate is another type of merger that is used in the corporate world. A
conglomerate is a merger between firms that are involved in different business activities. These
different business even have different suppliers and vendors. A conglomerate merger consists
of two companies that are not competitors, have no common interest. "Essentially, the
conglomerate merger usually brings together two companies with no connections whatsoever
under one corporate umbrella (wise Geek 1)." Conglomerate mergers are desired by investors
who want to have a strong presence in two markets. The popularity of conglomerates came
about in the 1960's when companies that operated in a single line of business wanted to
diversify the nature of their business through mergers and acquisitions. While on the topic of
conglomerate mergers, it is important to note that there are two types: a pure conglomerate
merger and a mixed conglomerate merger. A pure conglomerate merger occurs when the
companies involved with the merger have not either a direct or indirect connections. These
types of mergers are made up of companies that have absolutely nothing in common; but a
mixed conglomerate merger are made up of firms that seek to extend their products or their
markets. This type of conglomerate merger still involves companies that are non-competitors,
but they may share vendors or they may share some characteristics in a common industry. In
mixed conglomerate mergers, the two companies merge together in order to obtain access to a
larger market and consumer base. Firms form mergers for many reasons. They might want to
increase their market share, create synergy between the two of them, or for cross selling.
Another reason for conglomerates are for diversification and the reduction of risks. But, if a
conglomerate become too big because of the companies it has acquired, then the firm could
suffer. This was seen during the 1960's era of conglomerate mergers. There are many other

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reasons that a company might consider a conglomerate merger. A company's desire to increase
its market share and to be more involved in cross selling is amongst the most common reasons
for consideration of conglomerate mergers. Developing synergy is also another purpose behind
not only conglomerates, but any type of merger. A conglomerate may be formed in order to
allow two businesses to have access to each other's resources in order to gain significant
advantages in their respective industries. These types of mergers are also formed in order to
protect companies from the dangers of a declining economy. The formation of conglomerates
have been the force for companies for surviving shifts in consumer tastes, the advances in
technology that have made certain products extinct, and also the shifts in politics. "Many
business analysts find that a conglomerate merger, when handled properly, will result in the
newly combined multi-industry corporation being significantly stronger than the individual
companies could ever hope to become (Wise Geek 1)."
While conglomerates may be beneficial to companies, they also come with some
implications. Companies forming conglomerates in order to increase the size of their companies
has been a running theme. Despite the reason behind the decision to merge, conglomerates
can also have adverse effects on the functioning of the new company. This seemed to reign true
throughout the 1960's when conglomerates became popular. Another implication that arises
when two different companies form a new one is the fact that they do not attract the same
type of customers because they were operating in two totally different industries. Many
companies also pursue conglomerates because it gives them the ability to handle a wide range
of activities for a particular market. These companies would be able to conduct research

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activities and engineering processes that they could not have done before. These companies
also can increase their production and also increase profitability by strengthening the market.
An example of a conglomerate would be the one and only CBS Corporation. CBS broke
way from Viacom in 2006, and since then it had controlled much of its television and radio
broadcasting business. It is the most watched network under its brand. The CBS Corporations
has made more than $14 billion in revenue and more than $1.3 billion in profit. CBS owns 50%
of the CW network and its has full ownership of Showtime and CBS Radio. CBS also owns its
own sports network.
There have been many successful mergers and acquisitions in the corporate world. One
such acquisition, was the acquisition of Pixar by Disney. The deal took place in 2006. The
transaction value of the deal was $7.4 billion. This acquisition combines Pixar's creative and

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technological resources with Disney's array of world-class family entertainment, franchises,
theme parks, and cartoon characters.
Another example of a successful merger is the merger of Exxon and Mobil in 1999. The
deal was worth $81 million. The newly formed company was called ExxonMobil. As a result of
this deal, ExxonMobil became the largest company in the world. This merger was so large, that
the FTC had to regulate the restructuring of the company. The FTC had to restructure the
company in order to keep it from monopolizing the market. Even today, ExxonMobil remains
the strongest leader in the oil market. It is still the world's largest public held company, second
only to WalMart.
An example of a unsuccessful merger would be the merger of Daimler-Benz and
Chrysler. The merger took place in 1998 and was worth $37 billion. The reason behind the
merger was to create a trans Atlantic car making giant that would be a force to be reckoned

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with in the automotive industry. Although they had a plan, things did not work out. By the ear
2007, Daimler Benz had sold Chrysler to Cerberus Capital Management, a company that
specialized in restructuring companies that were struggling. Daimler sold Chrysler for $7 billion.
The merger of Sears and Kmart in 2005 is also seen as an unsuccessful merger. Both
companies were purchased by Eddie Lampert and renamed Sears Holdings. Sears, once a
legend found itself lagging behind department stores like Target and Wal-Mart, and high-end
stores like Saks Fifth Avenue. Some speculated that the downfall of Sears Holding was caused
because the fact that the sell soft goods, such as clothes and home goods, rather than selling
hard goods, such as appliances and tools. Some others credit their downfall to trying to
compete with Wal-Mart. No matter the case, by 2007, Eddie Lampert was named among
America's worst CEOs. As of today, Sears Holding is still on a downward path.
The merger of Nextel and Sprint occured in 2005. The intent of this merger was to
combine the opposite ends of the communications market spectrum, which consisted of cell

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phone and home phone service from Sprint, and business, infrastructure, and transportation
from Nextel. The deal was reported to be $35 million. Not long after the merger, important
entities from Nextel such as the managers and executives began leaving the company claiming
that the two cultures were not agreeing on anything. Around the same time, the economy
started to decline, and customers of Nextel and Sprint wanted more from their providers.
Because of competition from Verizon, AT&T, and the iPhone, sales began to fall ,layouts came
about in the company, and the company's stocks bottomed out. This merger was clearly a
failure.
Time Warner Cable merged with AOL in 2001 and the merger is also known as a
failure. The merger of these two companies was thought to be revolutionary because of the
popularity of the internet at the time. Time Warner Cable was a media heavy-hitter and AOL
was an Internet and email provider. The merger was worth $111 billion. The synergy of the two
companies never occurred. Because of the decline of the dial-up internet access, the newly
formed company never got off of the ground. Ever since the merger, the stock of Time Warner
Cable has fallen by 8o percent.

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The same way a company must be regulated by the government before a merger or
acquisition, they must also be regulated after the formation of a new entity. Mergers and

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acquisitions are monitored by the Department of Justice and the Federal Trade Commission.
The Federal Trade Commission is an agency whose purpose is to prevent monopolies and
encourage competition in the marketplace. The commission prevents fraud, deception, and
unfair business practices. The Department of Justice is a government agency whose purpose is
to enforce the law. Mergers are monitored heavily by these two agencies. They come to the
decision on whether or not a merger is legal or not. If they do not approve of the deal, then
there can be no merger of the two companies. A set of guidelines are published in order to
regulate the legality of the merger. This is to ensure the protection of consumers from illegal
pricing. It also ensures that there are a variety of businesses. To get a better understanding of
the potential of the influence of a merger, the FTC and the DOJ conduct economic reviews of
market conditions and the entire field of competition. They also examine whether the newly
merged company would have the ability to influence competitors or the ability to manipulate
prices in a way that could potentially harm customers. An important provision the in U.S.
antitrust law is the prevention of mergers and acquisitions that are non-competitive. Under a
law called the Hart-Scott-Rodino Act, the Federal Trade Commission and the Department of
Justice have the authority to review a majority proposed transaction that have some affect on
business in the United States, or any transactions that are over a certain size. These two
agencies can take the legal actions to stop deals that they believe would hinder competition in
any way. There are some exemptions, but for the most part the law forces companies to report
deals that have a value of more than $77.3 million to the FTC and the Department of Justice in
order to be reviewed.

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As with any type of business deal, the comes a set of problems or issues. With mergers
and acquisitions, there a numerous problems that occur because of the formation of a new
company. One problem with mergers is that many mergers and acquisitions involve companies
that are headquartered in different countries. This could be a problem when trying to choose
which practices will best suit this new company. Managers may assume that their knowledge
applies globally and they do not always take into consideration that performance drivers vary
from culture to culture. Another issue that may arise are the language barriers associated with
a merger or acquisition. Information about the deal must be communicated in all languages
spoken in order for all questions to be answered. The employees of both companies must be
taught and educated on the other language so that communication can be effective and
productivity can happen. Having good employee retention, communication, and training are
very important. These activities should be customized to suit the employee population. Training
is also another issue that results from a merger or acquisition. If it is not taken into
consideration, it could present several obstacles. Without providing training, the new
employees will take longer to get adjusted to their new work environment. Selecting employees
must be based on operational requirements after a merger. If cuts are made too quickly,
human capital can be lost and there could be a greater cost in attracting new employees or re-
hiring previous employees as opposed to retaining current employees.
Recommendations
• As with any problem, there need to be solution on how to solve those problems. To deal
with the problem of company's headquarters being located in different countries, I suggest

Wilson 33
that the two companies try both cultures and choose which ever one suits the best needs of
new company.
• To deal with language barriers because of the combination of companies from different
countries, the new company should have translators to help bridge the gap between
languages. As with any company, communication is important.
• To deal with training issues, I suggest that the company provides training for every
employee. Because the company has taken on a new identity, training will help everyone to
get familiar with each other and also help familiarize them with the new company and its
culture.
Conclusion
There are many types of mergers and acquisitions. There are also a variety of reasons that a
company may choose to undergo a merger or acquisition. No matter the reason, to undergo a
merger or acquisition is to undergo a change. Whether it is a chain in command, culture, or
supply chain, this change should be taken seriously. There should be serious consideration in
who will run the new company, what kind of employees the new company will have, the new
mission and objectives of the new company, and what type of products and services this new
entity will provide.
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Wilson 34
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Wilson 35
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Wilson 37
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