In times of globalization and increasing competition there are a lot of new big challenges for companies and their chief executive officers (CEO). High cost pressure, new competitors and the desire for a growing shareholder value are the challenges of global competitiveness.
After exhausting all opportunities of internal optimization potentials the only way for many companies to grow or to ensure survival is to merge with other companies. The CEOs of the companies try to manage the growing requirements by extending the business portfolios or even acquiring whole companies. So in 2013 in Germany the number of Mergers & Acquisitions (M&A) was the highest for five years. A study of the Boston Consulting Group says that from 1988 to 2010 more than 26.000 transactions were realized. This figure confirms the high importance of that method.
But are M&A the panpharmacon to handle the changing global markets and to ensure the prospective success of the companies? If you have a detailed look at the results you can recognize that a large number of executed M&A did not satisfy the expectations or even destroy value. The risks are all too frequent just underestimated. Often the failure is due to information asymmetry of the acting partners. This effect is called the principal-agency-problem.
What is the reason for that and why do so many M&A fail? What are the real goals of the participants of such an M&A-process? Do all participants pursue the same objectives or are there maybe any other intentions in the case? The following assignment deals with the M&A-process in relation to the principal-agency-theory and shows some solution approaches to avoid bad surprises for all participating companies after an executed M&A-process.
Inhaltsverzeichnis (Table of Contents)
- Preamble
- Introduction and problem
- Procedure and goal
- Basics
- Definition of Mergers & Acquisitions
- Definition of principal-agency-theory
- The principal-agency-theory in M&A
- Hidden characteristics
- Hidden intention
- Hidden actions and information
- Solution approaches
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This assignment aims to analyze the Mergers & Acquisitions (M&A) process through the lens of the principal-agency-theory. It explores the reasons behind the frequent failures of M&A transactions, specifically focusing on the information asymmetry between participating parties. The study aims to identify potential solutions to minimize negative surprises after an M&A process.
- The impact of information asymmetry in M&A transactions.
- The role of the principal-agency-theory in understanding M&A dynamics.
- The potential consequences of divergent objectives among M&A participants.
- Exploring strategies to mitigate risks and ensure successful M&A outcomes.
- Analyzing the challenges of global competitiveness in the context of M&A.
Zusammenfassung der Kapitel (Chapter Summaries)
The preamble introduces the problem of frequent M&A failures, emphasizing the role of information asymmetry and the principal-agency-theory. It outlines the structure and objectives of the assignment. The "Basics" section provides definitions of Mergers & Acquisitions and the principal-agency-theory, setting the foundation for further analysis. The chapter on the principal-agency-theory in M&A delves into the specific challenges posed by hidden characteristics, intentions, and actions within the context of M&A transactions. The "Solution approaches" chapter examines various strategies to address the information asymmetry and potential conflicts of interest. The conclusion, while not included in this preview, is expected to summarize the findings and offer final insights.
Schlüsselwörter (Keywords)
The key concepts and topics explored in this assignment include: Mergers & Acquisitions, principal-agency-theory, information asymmetry, hidden characteristics, hidden intentions, hidden actions, solution approaches, global competitiveness, and shareholder value. The work focuses on understanding the complexities of M&A transactions and identifying strategies to mitigate risks and ensure successful outcomes.
- Quote paper
- Tobias Marsch (Author), 2015, Principal-Agency-Theory in Mergers and Acquisitions, Munich, GRIN Verlag, https://www.grin.com/document/302640
