Integration Strategies for the Success of Mergers and Acquisitions in Financial Services Companies

Barros, Rafael Hernández; Domínguez, Ignacio López

doi:10.3846/16111699.2013.804875

Cited by 11 publications

(6 citation statements)

References 13 publications

(13 reference statements)

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“…This is based on the assumption that pre merger shareholders still retained some of their ownership with the HPQ shareholdings. This in line with [18] who found that managers can plan a successful integration process following a merger. On the other hand, Compaq has been witnessing a drop in its P/E ratio during the 1999 to 2000 period, while HP has been experiencing a rather stable P/E ratio during the 1996 to 2000 period.…”

Section: Comparative Analysis Of Eps and P/esupporting

confidence: 62%

Do Shareholders Benefit From a Merger? The Case of Compaq and HP Merger

Gurrib¹

2015

IJTEF

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Using a modified two factor model, market capitalization and book to market value were found not to add significant value to the shareholders' post-merger returns. Earnings per share (EPS) and the price earnings (P/E) ratio dropped in the year following the merger between the two entities, before eventually picking up in later years. While higher post-merger EPS suggest shareholders from the target firm tend to have benefited more than shareholders from the acquiring firm, the post-merger P/E tend to be higher for shareholders from the acquiring company.Index Terms-Book to market value, market capitalization, pre and post merger. I. INTRODUCTIONCorporate acquisitions are considered as a critical component of corporate strategy, management dealings, and corporate finance. It involves buying, selling, and/or dealing with a combination of different or similar companies. While the concept of mergers and acquisitions is usually dealt within the same manner, there is a distinction to be made. In acquisitions, one company takes over the other company or some part of its operations, while in mergers, there is an equal distribution of rights between the two companies. More importantly, there are some critical aspects which make corporate acquisitions important issues namely raising capital, strategic planning, communication, decision making and crisis management. Corporate expansion through acquisitions increases both the assets and liabilities of the company, with a greater inclination towards increasing the assets base rather than the liability side. This makes it easier for the company to raise money for future investments or future development. In regards to strategic planning, acquiring a business also includes acquiring skills and planning. The acquisition embraces the good skills of both companies, which helps with developing a better planning strategy. Communication wise, the importance of acquisition lays in the strong communication base and communication technologies. Acquiring a company may add to the strength of the communication skills for the parent company, which in turn helps in several other entrepreneurial activities for the Manuscript received September 7, 2014; revised January 8, 2015. Ikhlaas Gurrib is with Canadian University of Dubai, Sheikh Zayed Road, PO Box 117781, Dubai, United Arab Emirates (tel.: 971-4709-6140; e-mail: ikhlaas@cud.ac.ae).company. Further, it provides a framework towards proper decision making in terms of taking up another company, or ending up with mergers. Even after the acquisitions, it is important to have fair decisions processes among the people to ensure the existence of a proper network for the future development and growth of the company. Finally, but not least, most companies experience some sort of crisis at some point in time during the acquisition. To overcome this crisis, the company needs to design proper crisis management networks, which will benefit the shareholders and help to create a niche for the company.To understand the significance of corporate acquisit...

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Section: Comparative Analysis Of Eps and P/esupporting

confidence: 62%

Do Shareholders Benefit From a Merger? The Case of Compaq and HP Merger

Gurrib¹

2015

IJTEF

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“…Regarding firm size, in M&As studies, size is measured by market value (Martin & Shalev, 2017), number of employees (Buehler et al, 2006), total assets (Barros & Dominguez, 2013; Behr & Heid, 2011; Faccio & Masulis, 2005) or total sales (Amihud et al, 1990; Pablo, 2009). In our study, we adopt the definitions based on total sales and total assets adjusted for inflation 4 .…”

Section: Methodsmentioning

confidence: 99%

“…The literature approached the deal completions issue at different angles. For example, Kau, Linck, and Rubin (2008) focus on companies' market returns; Barros and Dominguez (2013) and Dauber (2012) assess post‐merger synergies; Pablo (2009), Rossi and Volpin (2004), Teerikangas (2012) and Wang and Wang (2012) analyse cross‐border determinants; Faccio and Masulis (2005), Gorbenko and Malenko (2014) and Ismail (2011) study the means of payments; Jandik, Lallemand, and McCumber (2017) examine the value‐return relevance of debt issuance for failed takeovers; Branch, Wang, and Yang (2008) focus on the estimation methods; Phalippou, Xu, and Zhao (2015) examine the U.S. M&As with the perspective of neo‐agency theory of takeovers; and Liu (2016) shows that failed takeover attempts in the USA could be “wake‐up calls” for the underperforming managers of target firms. On the other hand, Reddy, Xie, and Huang's (2016) case study analysis shows that the institutional and political background factors exert considerable influence on the completion rates of cross‐border M&As.…”

Section: Introductionmentioning

confidence: 99%

Why do some merger and acquisitions deals fail? A global perspective

et al. 2020

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We analyse why some merger and acquisitions (M&A) deals are withdrawn paying particular attention to the economic freedom and legal environment of countries. We use a large dataset based on deals worldwide from over 140 countries during the period 1977–2014. Our core finding is that the likelihood of a deal's withdrawal tends to increase if the economic freedom/quality of legal environment of the acquiring (target) firm's country is higher (lower). These core findings matter more for the non‐financial sector, during non‐crisis years, and in developed financial markets. We also report that the deals have higher tendency to be withdrawn if the target firm's size is larger or its profitability is lower; and the acquiring firm's size is smaller. Furthermore, our analyses reveal that deal characteristics (i.e., deal attitude, means of payment, deal size, ownership sought) also matter in affecting the outcome of announced M&A deals.

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“…However, they are not purchases but the union of owners of companies that participate in the merger (Sedlacek & Kuhrova, 2012). The price of target company plays a role only when companies with different (mutually independent) stockholders merge (Barros & Domingues, 2013). The presented research focuses in particular on mergers recorded in the Trade Register (2013) as implemented in the territory of the Czech Republic in the past six years.…”

Section: Figure 2 Tracking Trends In Manda Value Enhancement Over the mentioning

confidence: 99%

Mergers of Trading Companies and Causes of Their failure

Sedláček

Valouch

2018

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This paper presents the results of research on the efficiency of mergers carried out in the Czech Republic. The aim of the research is to find out if the mergers have met the expectations of the management and the owners of the merging companies. The methodology of the solution is based on the determination of the success factors of mergers, the classification of the level achieved by the mergers, the separation of the successful ones from the unsuccessful ones, the identification of the problems and the formulation of the hypotheses. The object of the analysis is a representative sample of mergers of all those carried out in the Czech territory at the interval of 6 years. The effect of the company size on the success of mergers is also examined. The results were verified testing the hypotheses with empirical data. The tests performed with the data taken from financial statements of the recent 7 years have confirmed that failure of mergers can be expected in 55 %-68 % of the basic set, i.e. all mergers implemented in the monitored period, with 95 % reliability. Research has found no direct correlation between the size of the acquiring company and the success of the merger. The results of the questionnaire research lead us to the conclusion that the highest risk in merger implementation in the Czech conditions is maintaining of employees and customers; on the other hand, a merger that follows an acquisition and thus represents finishing of the transformation process of a company seems to be trouble-free.

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Integration Strategies for the Success of Mergers and Acquisitions in Financial Services Companies

Cited by 11 publications

References 13 publications

Do Shareholders Benefit From a Merger? The Case of Compaq and HP Merger

Do Shareholders Benefit From a Merger? The Case of Compaq and HP Merger

Why do some merger and acquisitions deals fail? A global perspective

Mergers of Trading Companies and Causes of Their failure

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