To merge or not to merge, that is the question. Whether it is nobler Essay

To merge or not to merge, that is the question. Whether it is nobler in the mind to suffer the pains of negotiation & integratio - Essay Example A.T. Kearney noted that, despite the fact that mergers and acquisitions (M&A) activities having been associated with industrialized nations, the paradigm shift is taking effect (Kearney 2008, p.1). In this regard, Bruner (2004, p.21) reveals that as from 2002, merger deals between developed and third world countries have grown by 19 percent annually, which is far in excess of industrial average. This rate is also a clear indication that mergers are no longer a globalization strategy for developed countries only rather for developing countries, as well. The research found out that companies from third world countries such as China, India, Russia, Malaysia, South Africa, and the United Arab Emirates are seeking mergers with well-established companies in developed nations at an alarming rate. Kearney (2008, p.1) reveals that of the 2,168 mergers and acquisitions that were registered in 2007, 421-which accounts for about 20% were driven by firms from third world countries. The research a lso found that the trend is growing at the rate of 26 percent per annum. Research by Kearney (2008) found out that India is leading in cross-border mergers and acquisitions followed closely by Malaysia. This is attributed to the fact that the government of these two countries provides substantial tax incentives to companies to engage in high-tech business deals and enhance export. In contrast, Chinese companies have shied off M&A deals because of political interferences according to Wolff (2008, p.91). However, since China is developing very first, many companies from developed countries are seeking mergers with its domestic companies, with findings showing that at least one of every four cross-border transaction involves merger according to Harrington (2004, p.21). Nevertheless, research indicates that the U.S. companies lead in the acquisition and acquired. This dramatic increase in merger between companies as a globalization strategy has taken many people by surprising leaving ma ny companies, which have not made such a move wondering whether to merge or not to merge (Hoover 2000). This is because pundits have given varied opinions regarding mergers as a market penetration strategy. For instance, AT Kearney argues that global level mega-mergers are inevitable as part of the cycle of consolidation and concentration in globalising industries where firms seek to gain leverage and accelerate their presence. Ghemawat & Ghadar (2000, p.65), on the other hand, had a different view claiming that business leaders need to look away from mergers and be more innovative in their approach to international business. This paper will evaluate the arguments of the pro-merger and anti-merger school of thoughts. It will conclude with my personal position regarding whether mega-merger is a good or bad policy to pursue in international practice. Pro-merger school of thought To begin with, the business environment has become very competitive, and many companies today seek to globa lize their processes in order to beat the competition. In fact, many big corporations today have a global presence with those that have not gone global planning to do so as noted by McGarvey (1997). However, as earlier indicated, mergers have been on the rise over the last few year as the most preferred internationalization strategy. A.T Kearney (2008, p.1) in his school of thought argued that mega-mergers is inevitable as firms seek to leverage and become competitive. This