Managing integration during mergers and acquisitions

Abstract

The sustainable existence of any business lies in the growth of either scope or scale because with every passing day the risk of becoming obsolete due to technological innovations in market, upgradation of customer needs and entry of competitors make it compelling to expand in terms of either scale or scope and best is to go for both these strategies. To go for any sort of expansion, resources have to be increased in a multi-facet manner which implies that tangible resources like property, plant and equipment (PPE) and capital has to be boosted but development of intangible resources like human resource, expertise, technology etc are becoming increasingly significant in this age of innovation and rapid change. The growth strategy of any firm can have 2 types of orientations: a. Internal – where capabilities are built in-house. Capital is either equity or loans from financial institutions and this is used for R&D, trainings, licensing etc to develop the firm. This is an organic approach to growth and development and is time-consuming. b. External – where capabilities are either acquired by working along with a firm which has a better know-how about a particular task or by taking over the firm and incorporating all its assets, tangible & intangible, in its own present structure. Such processes are termed as Mergers & Acquisitions which can range from joint venture (where 2 firms come together to co-create value) to complete acquisition of one by the other.