Corporate Mergers and Acquisitions

Paper Summary:

This paper explains that a merger occurs when two different companies agree to join their forces to develop a bigger company; whereas, an acquisition occurs when one company takes over another company. The author points out that mergers and acquisitions provide a means of accessing new markets, technology and business operations, of obtaining cost savings and of providing an opportunity for competitors to survive in a highly competitive market by joining forces. The paper reviews the merger between Sprint and Nextel Communication Inc. to form Sprint Nextel Corporation and the acquisition of Storage Technology Corporation by Sun Microsystems and Paradyne Networks Inc, by Zhone Technologies.

From the Paper:

"Other sources of efficiencies may come from the introduction of new products, development of more efficient processes or improvement of product quality or service. It is however very difficult for the firms to find out in advance whether there will be any savings due to mergers, as these can be only judged after the entire merger process is completed. Another problem in minimizing costs comes from cultural differences between the companies or their styles of management. Even if there is weak competition, the need for cost savings are not realized and thus not achieved."

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