Question Tag: Strategic Issues

i) Strategic Issues in Mergers and Acquisitions:

1. Time: Mergers or acquisitions allow a firm to increase its market share or enter a new market more quickly than if the firm tried to expand organically. Since “time is money,” the ability to enter a market or increase market share fast through mergers or acquisitions can be the cheapest way to expand.
2. Cost: While cost savings can be achieved due to synergies, mergers or acquisitions may also be the most expensive way to expand due to the “premium for control.” Acquisitions might be expensive if they face resistance from target companies or government regulations under competition laws.
3. Regulation/Legislation/Culture: Mergers or acquisitions can ease entry into markets with regulatory restrictions, but they might lead to cultural issues or backlash from local customers or governments.
4. Assimilation and Integration: Integrating new employees, systems, and processes can lead to strains on the management, and handling a larger number of products or markets can cause “corporate indigestion.”