Are mergers always good or bad?: why merge?

The main aim of a business who has investors such as that of 'shareholders' is to increase shareholder wealth so in the case of mergers and aquisitions, i would expect this theory to remain a top priority for the merged companies.

Though mergers are suppose to benefit both shareholders and the organisation as a whole in both companies i believe this depends on how successful or unsuccessful the takeover is for the target and bidding company as described in a survey by Jensoon and Ruback (1983) on US firms.

Mergers and aquisitions are actually risks due to uncertainties, because no matter what the figures may represent, one cannot always tell the outcome of a takeover until after a few months or years. This will inturn be reflected in the joint company figures as well as that of the dividends (if any) for shareholders. There are a few reasons which have been highlighted by a survey by Coopers and Lybrand, which state the possible reasons behind a merger failure and a merger success. The reasons they highlighted made alot of sense and in the case of why mergers fail; i think the reasons given are something that can be seen as 'common-sense' by companies which should be avoided before embarking on a takeover or any joint venture.

Mergers are always meant for good but there are different motives as to why a firm would merge. For some it maybe for synergy, bargain buying, managerial motives, but i think most would merge because of 'market power' as this will enable a firm more sector control and global integration. Companies that plan to be successful after M&A, would have previously outlines a clear purpose for their actions, and would have analysed both company cultures as well as possible gains in order to ensure the success of their M&A.

Earlier in the week was the news of a merger between DemandTec to aquire M-Factor, which took place on March 9th 2011. M-Factor provides predictive analytics software for marketing and trade whilst DemandTec specialises in connecting retailers and consumer products companies. Together the companies are hoping to collaborate and produce a hightech "science-driven framework for optimising marketing mix ...". Prior to the aquisition the firms highlighted the gains of their current aquisition, this meaning they might have followed the 'reasons for success of M&A' as described by Cooper and Lybrand. Altogether their reasons of this aquisition i think is an opportunity for grwoth and integration, but the success of these two companies will depend on the company cultures and how well they operate within their sector for a competitive advantage before they would even think of obtaining 'market power'. But again only time will define the success of this aquisition, for now all looks 'bright and beautiful'.