Abstract
In this paper, a merger and acquisition risk management model is proposed for considering risk factors in the merger and acquisition activities. The proposed model aims to maximize the probability of success in merger and acquisition activities by managing and reducing the associated risks. The modeling of the proposed merger and acquisition risk management model is described and illustrated in this paper. The illustration result shows that the proposed model can help to screen the best target company with minimum associated risks in the merger and acquisition activity.
Highlights
Driven by globalization, international business looks for a bigger market to achieve the scale of economy, so as to overcome the economic barriers
In order to minimize the failure in merger and acquisition (M&A), a risk management perspective is proposed in this paper, i.e. an approach that attempts to maximize the probability of success in M&A by managing and reducing the risks that associated in the M&A activities
In conducting the M&A activity, it is necessary to work on how to minimize the risk of implementation, people, cultures, different legacy systems, business disruption, etc. are taken as the complex matters which need to be considered
Summary
International business looks for a bigger market to achieve the scale of economy, so as to overcome the economic barriers. Strategic management researchers use a different approach by analyzing M&A via examining management controlled factors, such as: diversification strategies (i.e., related vs unrelated diversification), different types of acquisitions (i.e., merger vs tender offer), or different types of payments (i.e., cash vs stock). Neither of these disciplines provides sufficient explanation for the failure of M&A. The M&A research findings from the earlier studies showed that most targets significantly increase in value whereas acquirers typically experience small declines in values These transactions have been extensively examined from perspectives such as auction theory and the “winner’s curse” is an established part of the literature. The approach of the M&A risk management model is divided into two steps, i.e. Risk Identification and Risk Quantization
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