Success Factors in Merger and Acquisition Projects
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The introduction of this Proposal as well the dissertation will explain the concept of critical success factors in mergers and acquisition and will investigate how an advisory firm can help in mergers and acquisition and its perspective. A short case organization State Bank of India will be made. The aim is to enlighten the reader about the problem formulation, the brief review of literature, aims and objectives and finally will the research methodology, data collection method, data analysis and conclusion will shown in this proposal.
The essay aims at seeing the in and out sights of what the research will be on the related issues around the thesis of the topic. The literature review aims at exploring the topic 'Critical Success Factors for Mergers and Acquisition Projects in the View of Merger and Acquisition Advisory Firms'. This proposal will be divided into two parts.
- Mergers and Acquisitions and Mergers and Acquisition advisory firms
- Critical success factors for the projects
The upshot of the review is the intention to develop the knowledge based on the gap which will be recognized through this review. The upshot is concerned with the critical success factors for Mergers and Acquisition projects in the view of Mergers and Acquisition advisory firms.
The filed of mergers and acquisition continues to experience dramatic growth. Record breaking mega mergers have become common place. Indeed, while mega mergers used to be mainly an American phenomenon; the current fifth merger wave became truly international merger period. Starting in the 1990s and continuing into next decade, some of the largest mergers and acquisition took place in Europe. This was underscored by the fact that the largest deal of all time was hostile acquisition of a German company by British firm. Economic growth was not only the reason for the large volume of deals throughout the world. Deregulation in Europe and the development of a common European economy also played a role. Nation such as Canada and Australia also exhibited a pronounced higher volume of deals. The picture in Asia is however was different. Here, restructuring and downsizing were more common place as the Asian economy remained week. Companies in Japan and Korea, long protected by their highly regulated economic structures, now had consider bankruptcy and others forms of restructuring as the means of working out their economic difficulties.(Gaughan, 2002).
Moreover, it has been highlighted that mergers and acquisition fail due to negligence at different levels during pre, post and due diligence period of the process. Thus this project would provide the development of mergers framework to facilitate the merger and acquisition process in the banking industry. (Cartwright & Cooper, 1993).
There are several reasons for those firms might engage in mergers and acquisition. One of the most common motives in expansion. Acquiring a company in a line of business or geographic area into which the company may want to expand can be quicker than internal expansion. An acquisition of a particular company may provide certain synergistic benefits for the acquirer, such as when two lines of business complement one another. A financial factor motivates some mergers and acquisition. For example, an acquirer' financial analysis may reveal that the target is undervalued. That is, the value of the buyer may be significantly in excess of the market value of the target, even the premium that is normally associated with changes in control is added to the acquisition price. Other motive, such as tax motives, also plays a role in an acquisition Decision (Gaughan, 2007).
Mergers and acquisition, by which two companies are combined to achieve certain strategic and business objectives, are transactions of great significance, not only to the workers, managers' competitors, communities and the economy. Their success or failure has enormous consequences for shareholders and lenders as well as the above constituencies. (Sudarsanam, 2003).
Mergers & Acquisition and Mergers & Acquisition Advisory Firms
This proposal as well as the Dissertation of Mergers and Acquisition (M&A) has brought into being in the literature since last two decades. (Appelbaum et al; 2007). As we hear Mergers and Acquisition in day-to-day basis I investigated that the rise in Mergers and Acquisition is due that fact that its increasing complexity of such transactions taking place day-to-day and time-to-time (Gaughan, 2002).
According to (Gaughan and Jagersma, 2005) Merger is the combination of two or more companies in creation of a new entity or formation of a holding company.( European Central Bank , 2000)
Acquisition is the purchase of shares or assets on another company to achieve a managerial influence, not necessarily by mutual agreement (Jagersma, 2005).
Mergers and Acquisition can be categorized into horizontal, vertical or conglomerate and the transactions will be viewed from the outlook of the value chain. (Ghaughan, 2002)
According to (Picot, 2002) Mergers and Acquisition process undergoes three processes: planning, implementation and integration. Planning covers the operational, managerial and legal techniques and optimization. The implementation covers a range of activities starting from the issuance of confidentiality or non-disclosure agreements, letter of intent and ending with conclusion on Mergers and Acquisition contract and deal closure. The last phase is concerned with post-deal integration. This model will be described by Watson Wyatt Model which has also five flows and this model undergoes stages such as Formulate, Locate, Investigate, Negotiate and Integrate. (Glaphin and Herndon, 2000).
Mergers and Acquisitions have positioned their efforts on giving the bigger picture of the motives of firms engaging in Mergers and Acquisition transactions. According to (Gaughan,2002) it takes a practical view to firm level he identifies the motives by referring to the theories. His motives are
Mergers and Acquisition is a way and means to be considered for the firms to grow on the faster rate
Mergers and Acquisition firms have a scope of economic gains as a result of economies on the larger scale
Larger the organization can result on Mergers and Acquisition and have a better access to capital market, which can show the way later to a lower cost of capital that is regarding financial benefits etc.
Mergers and Acquisition aims at imagined gains which a firm may experience when putting its higher authority skills into target business and practice.
According to (Trautwein, 1990) also provides us with a summary of motives and also Trautewein 1990 makes a statement that Mergers and Acquisition marks on Net Present Value.
According to (Jansen, 2002) in Picot 2002 Mergers and Acquisition is not a new invention. In 19th century the first time Mergers and Acquisition appeared in the picture. Five mergers and acquisition waves' 1880-Y2K will give the timeline of Mergers and Acquisition development.
Mergers and Acquisition Advisory firms
According to (Piscot,2002) the question arises that which mergers and acquisition advisors a company will need to consult in order to develop joint creative strategies and financing schemes and to look for suitable transaction partners this will be raised during the planning stage of mergers and acquisition process. External advice is sorted out going through different areas like investment corporate finance, commercial law, environment audit etc. (Sundarsanam, 1995)
Definition of Merger and Acquisition Advisory Firms
In this definition of mergers and acquisition (Sundarsanam,1995) explains that Mergers and Acquisition advisors as investment banks, corporate lawyers, accountants, stockbrokers, strategy consultants, investor relations and public relations consultants and environment consultants. He states that among these entire advisors investment bank plays an important in advisory in mergers and acquisition transactions.
Mergers and Acquisition advisory firm's role in mergers & acquisition transaction
According to (PEI Services Ltd, 2006) mergers and acquisition acts as match makers. Mergers and Acquisition follows following services:
- A valuation of business
- Marketing in business
- Assisting with diligence
- Resolving transaction issues throughout the process
- Conducting interviews and discussion with acquirers
- Providing strategic insights and negotiation skills on behalf of the client
- Creation of the marketing material
- Handling confidential documents on behalf of the client
- Solving transaction issues
According to (Daniel and Phillip, 2007) mergers and acquisition advisory firms perform the task to increase the market efficiency by cutting down the information asymmetries between the acquiring and target firms.
Factors affecting merger and acquisition advisory choice
It's clear that mergers and acquisition advisory firms are important but investments banks also play an important role in the key advisors in mergers and acquisition transactions. It looks on the closer outlook at what benefits mergers and acquisition bring to clients and in which situation firms get involve in mergers and acquisition firms in mergers and acquisition process.
Critical Success Factors for Projects
The proposal as the dissertation literature review will be divided into two sections.
Critical success factors are ' the set of circumstances, facts, or influences which contribute to the project outcomes' ( Lim and Mohamed, 1999)
Project success criteria are 'the set of principles or standards by which project can be judged' (Lim and Mohamed, 1999).
This will explained in detail in the dissertation.
Research Aims and Objectives
- To investigate the main roles of merger & acquisition advisory firms associated with merger & acquisition projects.
- To examine the process of conducting a merger & acquisition project.
- To find out the project success criteria for merger & acquisition projects
To explore from the perspective of merger & acquisition advisory firms.
RESEARCH METHODOLOGY AND RESEARCH DESIGN
The research is the plan of action undertaken by people in order to find our things in a systematic and make it realistic thereby increasing their knowledge. The research can be qualitative and quantitative. (Saunders et al. 2007). My aim of carrying out this research is analyse the relevant information which will be gathered by me. My research could be qualitative, quantitative or it is both based on the situation and the mood of the interviewee. The research will be done based on the interview or filling up questionnaires by a manager of State Bank of India.
A research design provides the frame work for the collection and analysis of data. A choice of research design reflects about the priority being to range of dimensions of the research process. (Bryman et al. 2007). Qualitative and Quantitative study will help in which my secondary and primary data will be collected in order to increase the strength of my findings. The research is based o the manager and some of the employees pertaining to critical success factors in mergers and acquisition projects of state bank of India which plays a role of an advisory firm. (Bryman et al. 2007).
Sample is the segment of the population that is selected for investigation. It is a subset of the population. (Bryman et al.2007,p182). My way of sampling will be random sampling. Non - Probability refers to a sample that has not been selected using a random selection method. Essentially this implies that some units in the population are more likely to be selected than others.( Bryman et al. 2007,p 182)
DATA COLLECTION METHOD
The purpose of the Data Collection Method is a type of method which has to be conducted; the data is collected more specifically to make this proposal as well as the assignment to make it more realistic (Saunders et al.2007, p131). A semi-structured and in depth (unstructured interviews) are non- standardized. This is often seen in qualitative research interviews (King, 2004). Unstructured interviews are more informal. (Saunders et al. 2007, p312). Structured interview use questionnaires based on prÃªt ermined and standardized or identical set of questions it is more often related to quantitative research. (Saunders et al. 2007, p312).
A semi- structured interviews method is related to qualitative research or quantitative or it can be both. This research is conducted in order to develop the deep understanding about the current issues happening in the organisation regarding the critical success factors of State Bank Of India which plays a role of advisory firms in mergers and acquisition. I will be using any one of them or any two of them for example structured - unstructured, or only structured depends on the situation.
The interview chosen by me is taken to support the primary data collection from where major findings emerge. The research will be done based on interviewing and filling up questionnaires by a manager and his employees. It is to make the key evaluation on the list of the critical success factors. I will also conduct a questionnaire associated with qualitative or quantitative or it can be both of them in research. This will give the idea and will also cross check with theory and practical. (Saunders et al. 2007, p101). Graphs and charts will be used if necessary to support the primary research.
My data collection will be explanatory or it can be descriptive depending on happening situation. Explanatory study is based on a search literature, interview 'experts' in the subject and conducting focus group interviews. Descriptive study is based on to portray an accurate profile of persons, events or situations. (Robson, 2002, p59). Description in management and business research has a clear place. However it should be thought of as a means to an end rather than an end itself. (Saunders et al. 2007, pp 133 -134)
According to (Saunders et al. 2007, pg 473) quantitative data is based on meanings derived from numbers, the collection results in numerical and standardized data and analysis conducted through the use of diagrams. However, Qualitative data is based on meanings expressed through words, collection of results in non- standardized data requiring classification into categories and analysing conducted through the use of conceptualization.
The following data will be analyzed as per the discussion that will be organized based on the findings from the both primary and the secondary data. The interviews will play a key role in doing the data analysis. Interviews and questionnaire will result in checking the general and valid analysis. The research will be done based on interviewing and filling up questionnaires by two managers. The analysis is also focus on overview in critical success factors of State Bank of India as an advisory firm in mergers and acquisition projects. Above all will support which will present the detailed discussion with the questionnaire supported. To give the right way of the analysis the data will be presented along with my evaluation and judgments of findings.
FORM OF PRESENTATION
The concepts will be specific and related with the project. The research document will be in the written form. Black and White colours will be used for this research. Research will be printed. It will be in binded form. Various diagrams and graphs will be used for this research. Flow of the data will be coherent. All the related data will be presented which can help to grasp the ideas and the ideal conclusion can be drawn based on the reliability of the data. Research will start in the simple form of the introduction with the industry and related issues. It will further discuss about the problem issues and different facts will be presented in a proper order.
After gathering all the information and data the researcher must spend lot of time thoroughly reviewing and evaluating the findings. Once the study is evaluated conclusions must be drawn. With the help of interviews proper theories should be formed which should give an idea about the situations of mergers and acquisitions in banking and financial sector.
Richardson, P., Denton, D.K. (1996), 'Communication Change', Human Resource Management, Vol. 35 No.2. Catwright, S., Cooper, Cary, L. (1993) The Psychological Impact of Mergers and Acquisition on the Individual: A Study of Building Society Managers, Human Relation Mar 93, Vol 46.
Daniels, K. and Phillips, R.A. (2007) The Valuation Impact of Financial Advisors: An empirical Analysis of REIT Mergers and Acquisition. Journal of Real Estate Research, January- March, 29(1), pp 57-74.
European Central Bank, 2000. Mergers and Acquisitions involving the EU Banking Industry- Facts and Implications [online]. Available at
www.ecb.int/pub/pdf/other/eubkmergersen.pdf [Accessed 1 July 2007]
Gaughan, P.A., (2002) Mergers, Acquisition and Corporate restructuring (3rd edition), John Wiley & Sons, Inc, New York.
Galpin,T.J. and Herndon, M. (2000) The complete guide to Mergers and Acquisitions, Jossey- Bass Publishers, San Francisco.
Jagersma,P.K. (2005) Cross- Border Acquisitions of European Multinationals Journal of General Management 30(3), pp13-34.
Picot,G. (2002) Handbook of International Mergers and Acquisitions: Preparation, Implementation and Integration, Palgrave Macmillan, New York.
PEI(Private Equity Info) Services Ltd., (2006) Mergers and Acquisition, advisory firms [online] Available at
http://www.advisoryfirms.com/?type=1&firmtype%5B%5d=Middle+Market&state%5B%5D=any&search.x=11&search.y=12 [Accessed 04 July 2008]
Sunders,M., Lewis, P., and Thornhill,A. (2003) Research Methods for Business Students, Pearson Education Limited, England.
Sudarsanam, P.S., (1995) The Essence of Merger and Acquisitions, Prentice Hall, Great Britain.
Trautwein, F. (1990) Mergers Motives and Prescriptions: Strategic Management Journal, 11(4), pp 283-295.
Lim, C.S., and Mohamed, M.Z. (1999) Criteria of project success: an exploratory re- examination, International Journal of Project Management, 17(4), pp 243-248.
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