CHAPTER ONE
INTRODUCTION
1.1 Background Of The Study
In this contemporary economy, it has been noted that the business of most organization is not dependent only on the financial resources available, or the numerical strength of the work force but as a result of the managerial ability, competence and management style adopted in such organization.
This explains why in present times stories are abound of failures, abysmal performance and on some occasion total collapse or winding-up of several business organization. So many reasons have accounted for this, one is globalization and technology and another is Mergers and Acquisitions (M & A).
The paradox is that
globalization, technology and M .~ A advances, open Up new opportunities even
as they threaten the status quo. ‘1 he history of mergers contains enough
tragedy to terrify the most resilient organization. The diversification wave
around the world in 1960’s and 1970’s famously ended in tears and break-ups.
Yet despite claims that lesson had been learnt, the 1990’s merger wave was as
damaging as any before it. Shareholders in acquiring firms typically gain less
from mergers than shareholders in acquiring firms. But according to a study,
Rene Stulz (2001) of Ohio State University and two fellow economist found out
that acquiring shareholders lost $216 billion- over 50 times what they lost in
real terms in 1 980’s, although they spent only six times as much. Strikingly,
these losses were concentrated in just 87 deals iii 1 998-2001. In total, mergers during that period actually
destroyed some $134 billion of shareholders wealth. Many of the most disastrous
mergers have been the result of chief
executives excessive ambition. The chairman Daimler (1999), Jorgen Shrimp’s acquired of Chrysler, or Time Warner Gerry Levis Merger deal with America- onLine (AOL).
In the past few years there has been so much hostility on Merger & Acquisition from investors and outside directors that the typical boss would propose anything other that doing a Merger. Today profit ;~ souring, balance sheets strengthened amid corporate governance reforms implemented. Investors amid outside directors are increasingly asking the boss not what lie is doing to get the firm back on track but how lie plans to expand it.
In this environment, Merger proposals are once again, enthusiastically received. These changes are throwing companies into state of confusion, regarding strategy on whether bosses would curb their imperial ambitions enough to proposed only deals that truly make business sense, whether boards and investors have mastered the courage to question a boss’s merger plans thoroughly or equally not to put him under such pressure that lie proposes a merger out of desperation and whether working together, shareholders or chief executive are better abbe to spot the difference between a faddish merger and a useful one. Also to protect profits, companies have primarily responded by cutting their cost, re-engineering their processes, and downsizing their work forces. Yet, even companies that succeed in cutting their costs may fail to increase their revenues if they lack strategic vision and strategic know-how.
In most viable
organizations, there is always the record of efficiency, effectiveness, higher
productivity and profit maximization. While it is otherwise in some of the
operations of their contemporaries. One of the reasons behind the successful
performance of business organization is the application of the principles of
strategic
management in the operations of their organizations by top level managers, in today’s environment of Mergers amid acquisitions.
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THE IMPACT OF STRATEGIC MANAGEMENT ON MERGERS AND ACQUISITIONS IN A DEVELOPING ECONOMY: A CASE STUDY OF NESTLE AND LEVER BROTHERS PLC.
