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Mergers and acquisitions refer to the process that involves buying, selling, and combination of different companies in order to boost the growth of an enterprise using a joint venture. However, whereas these two terms are used together, they refer to different business strategies as shall be outlined.

A merger refers to the combination of one firm with another. It refers to a process whereby two similar and equal companies decide to come together and operate as one company. The two companies become stronger together. For instance, Daimler-Benz and Chrysler merged to form DaimlerChrysler.  An acquisition, on the other hand, refers to the total purchase of one firm by another so that the ownership of the target company shifts to the new company. Thus, the target company ceases to exist.

This, therefore, implies that, despite the apparent similarities, mergers and acquisitions are slightly different. However, both mergers and acquisitions have a common goal. Both aim at making their total value better than the sum of the separate companies. For instance, this was the case when Daimler merged with Chrysler.

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In addition, mergers and acquisitions take place as a result of the following reasons. One such interest would be managerial self-interest. This is a selfish interest administered by the manager at the expense of the shareholders. In some cases, managers may make mistaken valuation and jump into a merger or acquisition. However, as outlined above, the main reason for mergers and acquisitions is synergy. This refers to a case whereby the managers believe that the value of the combined firms is more than the sum of the two firms exisrting independently. This is the main reason for mergers and acquisitions.

Consequently, mergers and acquisitions have numerous advantages. For instance, this process leads to cost savings. It also results in increased revenue enhancement through sharing and leveraging capabilities. It also results in increased market power and increased financial strength. This, in turn, leads to reduced threats and reduced competition. Mergers and acquisitions can also lead to diversification and empire building. Thus, this process, if handled properly, could result in positive returns for the companies.

However, mergers and acquisitions also have disadvantages. The process of acquisition and merging could be a costly endeavor. In addition, poor judgment from managers could result in failed mergers and acquisitions. This could, in turn, lead to inheritance of unnecessary businesses. Such processes could also result in organizational conflicts and eventual downfall of enormous companies.

Thus, though acquisitions might sound impressive, their implementation is not an easy task. In fact, the majority of the acquisitions made do not end up being successful.  Flawed intentions, for instance, a booming stock market, may encourage mergers and acquisition that may in the end prove to be unsuccessful. Acquisitions may also fail to be successful due to dishonesty. This is because managers mainly focus on the abilities of their acquisition partners as compared to their weaknesses. On the other hand, acquisition candidate might tend to withhold their weaknesses. This, in turn, creates a sense of dishonesty upon which the acquisition is built. Such an acquisition might eventually fail. In addition, acquisitions may fail if their core aim is to pre-empt competition rather than achieve synergy. However, the most common reason why acquisitions fail is theinability to integrate the acquisition into the organization.

Therefore, thorough research should be done by companies before venturing into mergers and acquisitions. The decision should, thus, be made based on the situational context. Since both acquisitions and mergers are different, the appropriate decisions should be made. However, the core aim of an acquisition should be synergy. This can eliminate the numerous reasons that might result in acquisition failure.

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