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But companies interested in implementing M&A strategies sometimes face hurdles in their
attempts to do so. Firms seeking to merge with or acquire Chinese firms often face complicated
trade barriers and other rules, procedures, and laws that are in place to protect domestic firms.
Honeywell International, Inc., for example, is frustrated with the pace of the acquisitions it
has been able to finalize recently in China. The firm seeks to complete $10 billion in M&A
activity in China by the end of 2018, although it is not confident that this goal will be reached.
The U.K. government is looking more carefully at companies’ attempts to acquire British firms.
Mainly, government officials believe that at least some and potentially many of these trans-
actions are against the public’s interest and may pose a risk to the continuing employment of
local/native workers. Thus, while certain factors influence a firm’s decision to use M&A strate-
gies, the reality is that some conditions may prevent them from being able to do so, at least in
certain situations.
Sources: 2015, M&A trends report 2015, Deloitte, www2.deloitte.com, April 21; 2015, For life sciences CFOs: Using M&A to
drive shareholder value, Deloitte, www2.deloitte.com, April 21; D. Cimilluca, D. Mattioli, & S. Raice, 2015, Rising optimism
fuels deal rebound, Wall Street Journal Online, http://www.wsj.com, April 8; A. Fukase, 2015, Japanese M&A overseas takes off,
Wall Street Journal Online, http://www.wsj.com, April 28; W. Ma, 2015, China’s lower growth goal doesn’t spook foreign compa-
nies, Wall Street Journal Online, http://www.wsj.com, March 5; L Wei & B. Spegele, 2015, China considering mergers among its big
state oil companies, Wall Street Journal Online, http://www.wsj.com, February 17.W
e examined corporate-level strategy in Chapter 6, focusing on types and levels of
product diversification strategies firms use to create value for stakeholders and com-
petitive advantages for the firms. As noted in that chapter, diversification allows a firm to
create value by productively using excess resources to exploit new opportunities.^1 In this
chapter, we explore merger and acquisition strategies. Firms throughout the world use these
strategies, often in concert with diversification strategies, to become more diversified. In
other words, firms often become more diversified by completing mergers and/or acquisi-
tions. As we discuss in this chapter, although a popular strategy for small corporations^2 as
well as large ones, using these strategies does not always lead to the success firms seek.^3 And
as described in the Opening Case, certain conditions may preclude a firm from engaging in
merger and acquisition activity, even though various factors are influencing it to try to do so.
A key objective of this chapter is to explain how firms can successfully use merger and
acquisition strategies to create stakeholder value and competitive advantages.^4 To reach
this objective, we first explain the continuing popularity of merger and acquisition strat-
egies. As part of this explanation, we describe the differences between mergers, acquisi-
tions, and takeovers. We next discuss specific reasons why firms choose to use merger
and acquisition strategies and some of the problems organizations may encounter when
doing so. We then describe the characteristics associated with effective acquisitions (we
focus on acquisition strategies in the chapter) before closing the chapter with a discussion
of different types of restructuring strategies. Restructuring strategies are commonly used
to correct or deal with the results of ineffective mergers and acquisitions.7-1 The Popularity of Merger and Acquisition Strategies
Merger and acquisition (M&A) strategies have been popular among U.S. firms for many
years. Some believe that these strategies played a central role in the restructuring of U.S.
businesses during the 1980s and 1990s and that they continue generating these types of
benefits in the twenty-first century.^5 As discussed in other parts of this chapter, mergers
and acquisitions are also occurring with greater frequency in many regions of the world.^6