companies in all over the world. Gu (2006) depicted that merger also plays an important role in the economic development as it provides synergy gains to merged organizations that causes an increase in their production and operational effectiveness and facilitate overall development of an economy. The merger or acquisition enables a company to expand its operation or production process through restructuring the organizational and production structure that helps to survive in the competitive market (Gu 2006).
There are several motives and benefits such as improvement in financial performance, operational performance, strategic performance, diversification to reduce risk, tax relief, economics of scale, improving efficiency of operations, lack of profitable opportunities etc. that motivates the organizations to implement this strategy (Ogilvie 2006). But at the same time, there are several other factors such as sometime business become so large that causes an increase in unit cost, sometimes increases work redundancy etc. that decrease the organizational interest for merger and acquisition. The companies that consider merger and acquisitions also consider the disadvantages of merger in its decision making.
M&A activities are also effective from the strategic perspectives as it provides different types of
strategic benefits to the organizations. Larsson & Finkelstein (1999) explained through the use of integrative model that merged firms realize the synergy gains from the M&A in the context of finance, strategy, human resources, and economics. The research explained that the success of merger mainly depends over the degree of synergy gains realized by the merged firms. This argument is also supported in the research conducted by Cartwright & Cooper (1995), Demirbag, Ng & Tatoglu. Larsson & Finkelstein described that the main motive of M&A is to achieve economies of scale and market power. But at the same time, there are some other reasons also for the firm that leads them to be engaged in M&A such as entry in a new market, capture existing customer base etc.
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