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Failure of Acquisitions Case Study


Introduction

An acquisition is a common phrase which has gained prominence in the contemporary world. It is a corporate system in which a corporation buys the target company’s rights or stakes in view of assuming direct control of the target company. Acquisitions are connected to a firm growth policy where a firm view it has a growth strategy and a convenient method of acquiring a functioning business entity operations instead of embracing its own growth.

Acquisitions can be termed as either aggressive or friendly. An aggressive acquisition happens based on the target corporation decision to be acquired by the target business (Badrtalei & Bates, 2007). Conversely, in a friendly merger, the recipient organization expresses its desire to be acquired. Many authors have discussed reasons which contribute to acquisitions. Hence, this paper seeks to explore reasons behind acquisition failures.

Why do acquisitions fail?

Corporate culture of the acquired organization helps to strengthen the recognition of the new acquisition. However, Hall and Norburn (1987) views that even if the acquisitions seem to have the best strategies in place, for a successful acquisition, cultural differences often contribute to the failure of the acquisition.

Levinson indicates that poor corporate culture often contributes to poor communication and inability to manage cultural differences within the corporation (1970). Cultural differences which cannot be resolved directly affect communications, productivity, decision making and employee turnover at all levels of the corporation.

According to Levinson (1970) many acquisition which take place encompass controlling behavior in managing the new acquisition. The top managers’ attitudes and actions are assimilated by employees, who embrace them in the form of practice (Morley, 2009). Hence, the controlling behavior becomes an issue.

According to Badrtalei and Bates (2007) the controlling behavior makes a commanding organization have equivalent procedures and processes in all aspects of its roles, management and operations, whereas the junior organization must complete the system ego.

Besides, as the controlling company imposes control systems from its fixed bureaucracy, stifling the junior the sheer quality it sought to achieve; thereby becoming obsolete. Similarly, some acquisition, from the onset, impose controls and institute arbitrary changes in sustaining their own ways of doing business, hence, “control” and “controller” fix the problem (Dash, 2010).

The desire for acquisition is drawn from the feeling that unless the organization expands and develops, larger companies will destroy it (Tomberlin & Bird, 2012). Hence, destruction is to be guarded only by being more powerful, and the easiest route is to acquire others. The process sets in motion process of accretion. The process of acquiring by accretion causes an organization to lose flexibility and adds extra load on the organization’s internal systems which include more managerial problems (Hall and Norburn 1987).

Crouch and Wirth notes that when an organization gets old, it forms bureaucracies and becomes fixed in the manner it represents objectives, defines jobs and structures tasks and responsibilities (1991). Hence, the systems of rigidity are used to control the organization leaving less opportunity for individual initiatives and spontaneity to emerge and grow.

In other words, bureaucratizing the systems contributes to fostering known standards and prescribed process of formulating actions. Besides, an organization with an aging workforce becomes trite to versatile changing conditions and less amenable to cope with the environment, hence, fear and obsolescence form psychological traps. Risberg view that fear and obsolescent contribute to impulsive actions, which frame the challenges of an acquisition (1997).

References

Badrtalei, J & Bates, DL 2007, Effects of Organizational Cultures on Mergers and Acquisitions: The Case of DaimlerChrysler. International Journal of Management, Vol. 24, no 2, pp.303 – 317

Crouch, A & Wirth, A 1991, “Managerial Responses to Mergers and Other Job Changes: A Comparative Study”, Journal of Managerial Psychology, Vol. 6, no 2, pp.3 – 8

Dash, AP 2010, Mergers and Acquisitions, I. K. International Pvt Ltd, New Delhi

Hall, PD and Norburn, D 1987, “The Management Factor in Acquisition Performance”, Leadership & Organization Development Journal, Vol. 8, no 3, pp.23 – 30

Levinson, H 1970, A psychologist diagnoses merger failures. Harvard Business Review, pp. 139 -147

Morley, M 2009, The Global Corporate Brand Book, Palgrave Macmillan, New York

Risberg, A 1997, “Ambiguity and communication in cross-cultural acquisitions: towards a conceptual framework”, Leadership & Organization Development Journal, Vol. 18, no 5, pp.257 – 266

Tomberlin, J & Bird, W 2012, Better Together: Making Church Mergers Work, John Wiley & Sons, New Jersey

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IvyPanda. (2019, June 25). Failure of Acquisitions. Retrieved from https://ivypanda.com/essays/failure-of-acquisitions/

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"Failure of Acquisitions." IvyPanda, 25 June 2019, ivypanda.com/essays/failure-of-acquisitions/.

1. IvyPanda. "Failure of Acquisitions." June 25, 2019. https://ivypanda.com/essays/failure-of-acquisitions/.


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IvyPanda. "Failure of Acquisitions." June 25, 2019. https://ivypanda.com/essays/failure-of-acquisitions/.

References

IvyPanda. 2019. "Failure of Acquisitions." June 25, 2019. https://ivypanda.com/essays/failure-of-acquisitions/.

References

IvyPanda. (2019) 'Failure of Acquisitions'. 25 June.

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