Merger and Acquisition Activity

The economic restructuring process created pressure for the remaining businesses which have to converge all advantage factors. These businesses will contribute to the formation of a new organization and effect activities in the new situation, thereby increasing the positive motivations for economic development, contributing to improve the structure, coherence and able to participate in the global supply chain of each company in particular, of the economy in general. Merger and acquisition activity (M&A) generate the change of ownership structure, control, administration, financial capacity and business scale, thus contributing to opening up opportunities for new business, enhance competitive position and starting a new development cycle for a business.

There are some main advantages from M&A activity of company:

• Economy of scale: When two companies merge or acquire together will form a stronger company. Then, they will take advantage of large-scale trading about capital, people, financial capacity improved significantly, reduce business risk, and increase market power. So, the company will be in a better position when conducting transactions or negotiating with partners. On the other hand, large scale also helps enterprises reduce the unnecessary costs incurred.
• Increase market share and reputation in the industry: One of the objectives of the M&A activities is to expand into new markets, increase revenue. M&A allows expansion of marketing channels and distribution systems. Besides, the position of the new company after the M&A will increase in the eyes of the investment community: bigger companies have more advantages and ability to raise capital easily than a small company.
• Equip new technology: In order to maintain competitive advantage, companies need of technical investment and technology to overcome the competitors. Through M&A, the company may transfer techniques and technology for each other, and take advantage of technology transfer in order to create competitive advantage.

However, the company also has to face with some significant problems. Firstly, M&A often make the wealth of the acquirer’s shareholders reduce. One of the reason is  there are many merger and acquisition activity occur in a long-time, so it can lead to unstable situation in operation as well as in finance. Then, company cannot manage and control their activities effectively. Moreover, the main reason for this reduction is failure in strategy and top management as well as the acquirer could over optimism about the profit it could gain. The next problem is M&A activity can affect the corporate culture. When two or more companies merger together, all the unique characteristics will be integrated in new context, so all staffs could feel inconvenience when working in environment with mixed corporate culture. Besides, they also must find out the way to adapt with the change in communicating with new customers and new colleagues.  Finally, when acquiring, the business will reduce the number of employees, especially indirect job such as officer, accountant or marketing…And the consequence is increasing unemployment labor and effecting the development of society.

One of the examples about M&A activity is BT continues to expand into sport broadcasting by acquiring ESPN UK and Ireland TV channels in 25 February 2013, according to BBC News. The deal helps BT to add to its live sports coverage and acquire the ESPN and ESPN America channels, and their live rights to show FA Cup, Scottish Premier League, Uefa Europa League, and German Bundesliga matches. As can be seen, this acquisition of BT helps the company to add more products and services for customers. They will provide more exciting new sport channels as well as improve quality live football. On the other hand, in my opinion, BT also expanded economy of scale of the company by increasing the number of subscribers in the market in compare with their competitor – BskyB. Besides, I believe that when occur acquisition, BT will implement to cut off job to adapt with new situation and improve their performance.