Mergers and Acquisitions

INTRODUCTION

Joint ventures, strategic alliances, mergers and acquisitions become a necessity of the global economy and this is caused by the technological innovations, rapid geographical expansion, shortening product life cycles, increasing costs and risk. The executives of companies are led to seek for new ways to satisfy the increasing consumers’ needs and companies’ inability to supply a complete set of goods and services. Therefore these partnerships are often treated as companies’ reaction to the environmental changes. (Varadarajan, Cunningham, 1995)

In this report we will take a glance at joint ventures, strategic alliances, mergers and acquisitions together with their forms, benefits and failures.

1. Joint Ventures

1.1. Forming a Joint Venture

A joint venture is an agreement by two or more parties to form a single entity to undertake a certain project. Each of the businesses has an equity stake in the individual business and share revenues, expenses and profits.

"Joint Ventures are agreements between parties or firms for a particular purpose or venture. Their formation may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show. Other arrangements can be extremely complex, such as the consortium of major U.S. electronics firms to develop new microchips," says Charles P. Lickson in A Legal Guide for Small Business. Joint ventures between small firms are very rare, primarily because of the required commitment and costs involved.

http://www.marketingminefield.co.uk/traditional-marketing/strategic-alliances/types.html

A joint venture is a legal partnership between two (or more) companies where in they both make a new (third) entity for competitive advantage. With a JV you will have something more than simple governance; you'll have a completely new entity with a board, officers, and an executive team. Effectively a JV is a completely new organization, but owned by the...