e aggregate concentration, confer market power upon particular industries and actors, and result in unprofitability and yield few efficiency gains when ill-managed.
Mergers and acquisitions, by their very nature, are fraught with many uncertainties. However, due to vast new markets opening or becoming more accessible, and as trade barriers continue to fall, new corporate alliances are accelerating at an exponential rate. The majority of mergers and acquisitions bring both opportunities and challenges and require the development of programmed approaches to the management of change, risk, and uncertainty mergers and acquisitions are a main element of strategic planning for large, medium, and small companies. Yet, there is a widespread belief that mergers and acquisitions are always profitable and add value for and to the acquiring company.
Many companies often pay too much – and predictably never realize the promises of increased performance and competitiveness. The Sony acquisition of Columbia Pictures is one such example, and few in the mergers and acquisitions world forget the RJR Nabisco disaster, in which the fight to control RJR Nabisco led to a doubling of its value to $25 billion (Burrough and Helyar iii). Despite the pitfalls and uncertainties associated with mergers and acquisitions, the 1990s has continued to see a proliferation of corporate marriages among all business sizes:
Through the third quarter of 1995, corporate marriages had already totaled over $564 billion, and surged to an astounding $866 billion by year-end. Compared to the 1980s high of $311 billion set in 1988, the staggeringly high level of recent merger activity shatters all records set in the past decade. Industries as diverse as technology, defense, health care, transportation, utilities, financial services, and media are all experiencing an ever-accelerating stream of transactions. Moreover, the size of such deals are soaring at an eq...