A well-thought-out research question is the key to a good research. However, for a research work to be considered as well written and comprehensive, it must have a strong foundation in the areas of literature review, methodology, as well as the methods of inquiry, and data collection analysis. The researcher must be able to address all the key issues, problems, scenarios and relevant factors surrounding the research question. This is now the focus of this essay— to generate and develop a rational and comprehensive outline based on the research question to be adopted. The task also includes a review of related literature and strategic management issues, which will be used in arriving at a carefully planned research question.
The supposed research focuses on the causes and consequences of merger and acquisition in the market economies. A research question to be shown below will be developed out of the result of the review of related academic literature and strategic management issues and relying on the research question, the next task is to propose the most suitable methodology, data collection methods, and data analysis techniques to be used in completing the supposed thesis or dissertation.
Literature Review
Mergers and acquisitions (i.e. buy-outs, takeover) are just some of the indispensable activities in the corporate world. Under a free market system, corporate players need to compete with each other in order to survive in the fast evolving world of market economies (Gasman, 1994 p4). The survival of a certain business entity or corporation in a capitalist country is determined by its capability to cope with stiff competition and market trends, as well as its capacity to ensure innovation and creativity. In order to survive, a business entity must maintain an innovative phase and makes it a mandatory corporate policy (Baumol, 2002: p.2). To guarantee this inventive pace, the business entity must be able to formulate an effective corporate strategy that will be religiously implemented and adopted by its officers. Such a corporate strategy must have short term and long term goals and objectives that must be thoroughly considered (Karami, 2007: p.160).
Failure of corporate managers to effectively cope with the changing market trends would result in the bankruptcy or even collapse or closure of the company. There had been many studies concerning failure of companies that led to merger and acquisition. Most of these documented studies focused on corporate activities in the United States for the past 50 years. One of which is the study conducted by Altman (1971) detailing the reasons of corporate malfunction, which are the following: incompetent management, undesirable domestic and personal issues, injudicious expansion of credit, and corruption and fraud. On the other hand, Dewing (1941) focused on the economic grounds of corporate collapse. These grounds were— a) competitive factors, b) unbeneficial spreading out, c) termination of public demand, and d) surplus payment of capital charges. Some studies also showed that there were instances wherein corporations usually fail when there is compact economic growth, poor stock market performance and money supply conditions.
In another study conducted by Altman (1983), it was concluded that the most striking reason why corporations and business entities fail or collapse was due to managerial incompetence, inexperienced corporate managers, as well as unbalanced experience or plain inexperience. Another study pointed out that mismanagement was the main reason of corporate failure (Jovanovic and Lacquemin, 1997). The study guided corporate leaders in policy-making and decision-making. This also resulted in corporations’ promulgation of corporate policy wherein all members of the board must participate in all important corporate activities and meetings. To avoid corporate failure, most companies also adopted the no one-man rule policy.
Peel (1990) reported that most of the main causes of corporate disintegrate were— the presence of autocratic leader, opposition to change, over-diversification, lack or inadequacy of corporate control, “bad luck”, and decentralization. Insolvency was also one major reason why a corporate entity fails or acquired by another dominant corporate entity. Here, Bathory (1984) categorized insolvency into three groups— acute insolvency (inadequate cash or failure to meet monetary obligations as they fall due); chronic insolvency (inability to answer monetary obligations as they fall due), and terminal insolvency (inability to obtain or acquire funds). In his book, Argenti (1983) suggested possible ways to counter corporate problems, especially that of an autocratic corporate manager. He recommended that stockholders must avoid: tyrannical chief executive, poor accounting schemes, and insufficient reaction to change. Thus, the ultimate solution was to fire the autocratic CEO, enhance accounting system and Information Technology infrastructure, and update the old-fashioned.
In a recent study, Reed and Lajouz (1998) state that merger emerges when there is a fusion of two corporate entities, wherein one is absorbed by the other. The authors said that all mergers are merely statutory mergers because all corporate fusions emerge as a result of official business deals according to the provisions of law of the country where they were incorporated. On the other hand, acquisition refers to the processes by which the stocks or assets of a business entity are acquired by another corporation or business entity (Reed and Lajouz, 1998: p.6-7).
Most of the time, trends in merger and acquisition are goaded by shift of economic policies by the government. For example, the merger wave that occurred in the United Kingdom in the 1990s was mainly driven by deregulation of British businesses combined with the policy of privatization (Owen, 2006). There are many kinds of merger. The most popular is the friendly merger transaction wherein both agree on the terms of the merger (Reed and Lajouz, 1998: p.6-7). Meanwhile, acquisition can be beneficial to both the acquired and the dominant corporation. For example, the acquisition of the France-based PPR group of Puma was beneficial to both companies (Puma and PPR, 2008). However, in case of merger, problems with respect to relations between the two merged companies usually arise due to question of superiority. In the case of Ford Europe and Fiat, both compete on who should be in control of the would-be fused company, and this resulted in withdrawal (Haspeslagh and Jemison, 1991: 65).
In order to ensure a long-term relational interest between two companies, the two corporate entities that are willing to merge should undergo courting process (Graebner and Eisenhardt, 2004: 384). This means that there must be willingness on the part of the two corporate entities to sell and to be acquired and that be clear and shared acquisition interest.
The Research Question
Based on the foregoing discussion, the most suitable research question to be utilized in this study would be the following:
What are the external and internal factors affecting merger and acquisition and what are the consequences of such merger and acquisition?
This would be the most appropriate research question for this study because it targets the element of “cause and effect.” In this case, it seeks to investigate and explore the cause as well as the effects of corporate merger and acquisition. The review of academic literature provided above is just the tip of an iceberg of data information. The researcher may even choose to explore the historical background of merger and acquisition in some developed countries like the United States, United Kingdom, and Japan, and then arrive at an analysis. However in this age of Information Technology, there have been many trends in the global market that ignite merger and acquisition. One major trend is globalization that had spawned great changes in the global economy. Globalization itself has so many aspects, factors, characteristics, and even misconceptions.
The informational requirements in order to support the research question must be given much emphasis. There are so many information and data available in information databanks that would support the research question. Thus, there is a need to holistically approach a research question (Kehoe, 2004). However, to streamline these data and information, there is a need to formulate an effective methodology.
Methodology
The usefulness and integrity of information and data to be used and incorporated in the research work or dissertation depends upon the methodology to be applied. There are four methodologies that can be applied in this study. These research methodologies are the following:
a) Interview
b) Observation
c) Case studies
The above three are the most fitting methodologies for this particular study because they enable the researcher to obtain all necessary information of different levels, kinds, and sources.
On the other hand, interview enables the researcher to target only those persons in the upper hierarchy of interview subjects like managers and chief executive officers in the case of corporations. There are many advantages of this type of methodology, such as the tendency to generate more accurate information, good response rate, possible better questions, ability to investigate deeper, it enables the use of recording gadgets, and so on. Some of its disadvantages, however, are the need to schedule interview, it is time consuming, geographic limitations, requires expenses, it need a set of good and well-prepared questions, the tendency of the respondent to be bias, hesitation to ask personal questions, the need to transcribe, among others. Taking into account the nature of the study, it would be best to conduct a personal interview, however, due to time and financial constraints, the researcher may then opt to do it by phone, email, or chat whichever is possible. As mentioned, the researcher has to set the interview schedule so to be able to meet his/her sources or respondents either personally or through phone or email.
Observation is useful when it is used to record or witness behavioral patterns and circumstances of people, things and events in a methodical manner. This method can be structured or unstructured, disguised or undisguised, natural or fixed, mechanical, personal, non-participant and participant. In this particular study, it is better to have the observation structured because it enables the researcher to identify in point what is to be observed and how the results are to be inputted or recorded.
Case study is the most suitable methodology in this kind of research. Using this methodology, there is a need to make a fair and extensive examination of the subject matter of this study. The focus then of the case study is the corporations engaged in merger and acquisition and to find out the reasons and causes as well as the effects or consequences of these merger and acquisition. In order to make the case study methodical and systematic, the researcher has to follow the following phases:
Determination of the current situation
Collect as many background information as possible regarding previous and recent key variables
Testing of theories or hypotheses. The reason why there is a need to gather plenty of background information is to analyze them support or prove the formulated hypotheses. Elimination of unnecessary information occurs in this stage so that they will not be in conflict with the data collected and to focus on the more significant premises
Taking counteractive courses of action.
In relation to the subject matter, it is important to gather as much information regarding companies engaged in the activities or merger and acquisition and to know the implication of the same after such merger and acquisition on the interest of the companies involved. However, in case one of these data collection methodologies fails or would not materialize, the best alternative is focus group discussion with selected respondents.
Based on the nature of data collection methods to be used, the researcher would be focusing more on qualitative techniques of data collection since the methods to be used are observation, interviews, and case studies (Davies, 2000). Thus, there is no need to think about the sample size because it is only applicable in surveys. The researcher will have to focus only his time and resources on scheduling interviews with selected corporate managers, business analysts, and experts, preparing interview questions, and gathering as many secondary information as possible.
For the interviews, the following may be considered as respondents:
Corporate managers and CEOs (at least 15 respondents)
Reliable business analysts (at least 10 respondents)
Academics who are expert in business (at least 10 respondents)
Some secondary information, on the other hand, that may be included in the study are the following:
Case study of Starbucks, acquiring the original coffee company
Case study of Puma AG being acquired by the French PRR group
Case Nike that acquired Reebok
Case study of Procter and Gamble, among many others.
Design
The only data gathering method that requires the use of questionnaires is interview. It is best, however, to be the questionnaires unstructured because the researcher will be dealing with four different kinds of respondents or sources such as those enumerated above. The questions to be given to corporate managers and CEOs will be different and distinct from those of business analysts. At the same time, the questions to be thrown to the business analysts will be different from those of academics. For example, the questions for corporate leaders will only focus on their personnel experiences regarding merger and acquisition or their perception about the same. On the other hand, the questions to be given to business experts will mainly concentrate on their professional perception concerning the causes and consequences of merger and acquisition. For the academics, the information taken from them would be about the theories and models that were formed by the waves of merger and acquisition that had happened through the years.
Interview Questionnaires
The first type of questionnaire will be given to the manager of a corporation that experienced merger or acquisition, while the second type will be given to the manager of a corporation or a business entity that plans or is about to merge with or acquire another company. The following questions will appear on the first type of questionnaire:
Q1. How did the merger/acquisition affect the overall status of your organization financially and in terms of your goals?
The purpose of this question is to know the impacts of the merger or acquisition on the financial side and organizational side of the company. Further, it is important to know whether the company through the merger/acquisition was able to realize its goals.
Q2. What were the factors or forces that drove the company to merge with or acquire another company?
It is interesting to find out what motivated or drove the board or leaders of the company to merge with or acquire another company. This is because in this age of globalization, most stable companies choose to merge with or acquire their rival companies because of competition. This is because acquiring weak companies would give the dominant ones a strategic position in the market against their direct competitors.
Q3. What are the outcomes or goals that your company seeks to accomplish out of this merger/acquisition?
It is not enough to plainly ask the manager or CEO Q1 and Q2. It is important to make the interviewee tell what the interviewer would like to know. Did the company move for merger or acquisition because it wanted to expand its market, to diversify, to try new product lines, to strengthen its position, or to weaken its direct competitor?
Q4. What are now the strategic goals of the company after the acquisition/merger and how would you go about them?
Apart from the anticipated answers in Q3, there may be general or specific goals that the company would like to realize such as for instance, those enumerated in its long new long terms and short term goals.
Q5. After the merger/acquisition, how do the market trends, both locally and globally, now affect your company?
Did the company become stronger, more viable, more aggressive and assertive of its new corporate goals?
Q6. What were the major changes in the organization/company brought about by the merger/acquisition? How did the company enforce these changes and what are the target goals of the same?
Because of the merger/acquisition, it is possible that there might be some changes within the company. These changes could pertain to the organizational structure, revamp of key administrative positions, organizational change, change of policies and strategies, among many others.
Q7. Did the company experience post-merger/acquisition jitters or problems? If yes, what were the strategies and policies implemented by the company to counter these post-merger/acquisition problems?
It is most expected that most companies that had undergone merger and acquisition encountered early jitters or problems like the need to adjust or adopt to a new corporate culture or environment, to deal with new officials and employees, etc. The goal here is to know the techniques or strategies they employed so to cope with these early jitters or changes.
Q8. Overall, how would the merger and acquisition help the company achieve its long term goals and how would you go about the latter?
The purpose of this question is to elaborate on the general goals of the company and how they would achieve the same. This is because merger/acquisition did not come as a surprise or without any purpose. It has to have some purpose and goals that the company seeks to achieve and this is now the focus of the company managers and leaders.
On the other hand, the questions for business analysts would be mainly about the market trends they think that affect the relations of business entities in the corporate world. The questionnaire shall include the following variables:
Market trends that ignite merger/acquisition wave
Some internal and external factors that trigger merger/acquisition scenario
Their respective theories concerning merger and acquisition
Post-merger/acquisition scenario
Meanwhile, academics will have to deal with questions that focus on theories and concepts about merger and acquisition, possible models that are contributive to the goals of the research undertaking, some important backgrounds and generational analysis about merger/acquisition, and how these trends and concepts affect the academe, among many others.
Interviews
Most of the raw data will come from interviews. Because of this, there is a need to conduct a well-thought-out interview process in order to ensure the success of the research. The outline or schedule of the interview is as follows:
n Make a list of some possible interview respondents with their corresponding personal and professional information, as well as business address, contact numbers and email address. Think of as many as respondents as possible.
n Shortlist the number of interview respondents according to the following factors: significance or prominence of the interviewee, accessibility, time factors, and the value and amount of information to be obtained and its significance to the research goals.
n Make Plan B, which contains another set of shortlisted respondents in case Plan A does not materialize.
n Make an in-depth research about the shortlisted interviewees. Obtain more information about the positions they hold and about the company they represent. For business analysts and academics, to know more about their professional background and achievement with respect to the purpose of the research.
n Make appointments with the shortlisted respondents. If some respondents, turn to some back-up respondents under Plan B and then apply the last preceding step.
n Confirm the interview schedule. Know the availability of the respondents and the means of communication which they can be reached (e.g. phone, email, or personal).
n Prepare interview questions by taking into consideration the individual and professional circumstances of the respondents.
n Edit and update the interview questionnaires as much as possible.
n Commence the interview.
n Post interview activities: Transcribe the interview and then process the raw data.
Ethical Issues
To avoid breach of ethical standards, the researcher has to ensure the respondents that all information he may be able to obtain from the interviews will be for academic purposes only and that they will not be given to third parties without their expressed consent. As already outlined above, before making an interview, there are several conditions that have to be met first. For example, appointments have to be arranged and the same must be confirmed.
Data Collection Analysis
Through this method, the researcher may be able to explore the issues at hand through all the information and data gathered and then analyze the same. There are some methods of inquiry that can be used to justify this methodology like the use of PESTEL method and Porter five forces analysis. The PESTEL method enabled the researcher to go deeper into the following factors: Political, Economic, Social, Technological, and Legislative. The Porter five forces analysis will help the researcher understand the movement of competition in the market (Mind Tools, n.d.). This type of analysis has five forces such as the following: a) bargaining powers of costumers, b) threat of new entrants, c) threat of substitute products, d) bargaining power of suppliers, e) competitive rivalry within the industry. Another method of inquiry that may be applied is the soft systems methodology as it can be used to analyze a general problem, as well as changes in the corporate management. This methodology has seven-stage description which are the following:
Unstructured problem
Understanding world views
Creating root definitions
Testing conceptual models based on world views
Comparing conceptual models with reality
Identifying desirable changes
Acting to improve the situation
Project Limitations
The perceived limitations of the project are as follows:
a) Financial constraints
b) Time constraints with respect to data gathering and interviews
c) Geographical limitations, with respect to interview respondents
d) Accessibility, with respect to interview respondents
To overcome these constraints and limitation, there is a need to adopt Plan B as those taken in the interview steps above. For geographical constraints, the researcher may opt to conduct the interview via phone or email by making an appointment or sending a letter of intent to interview to the respondent himself of his/her secretary or subordinate.
References:
Argenti, J. (1983), ‘Discerning the Cracks of Company Failure,’ Director, October, pp.67-73.
Altman, E.I. (1971). Corporate Bankruptcy in America. Lexington, MA: Heath Lexington Books.
Bathory, A. (1984), Predicting Corporate Collapse: Credit Analysis in the Determination and Forecasting of Insolvent Companies, Financial Times Business Information, London.
Baumol, W.J. (2002). The free-market innovation machine: analyzing the growth miracle of capitalism. Princeton, NJ: Princeton University Press.
Checkland, P. and Scholes, J. (1965). Soft Systems Methodology in Action. London: Wiley.
Davies, R. (2000). Qualitative and quantitative market research, Asian Market Research. Available at http://www.asiamarketresearch.com/columns/market5.htm
Dewing, A.S. (1941). The Financial Policy of Corporation, Ronald Press.
Gasman, L. (1994). Telecompetition. Washington, DC: Cato Institute, p. 4-5.
Haspeslagh, P.C. and D.B., Jemison (1991). Managing Acquisitions. New York: Free Press.
Puma AG (2008). Puma and PPR are a perfect Fit— Mr. Pinault. Fibre2fashion.com, 03 June. Available at http://www.fibre2fashion.com/news/fashion-news/newsdetails.aspx? news_id=57334
Karami, A. (2007). Strategy Formulation in Entrepreneurial Firms. Burlington, VT: Ashgate Publishing.
Kehoe, A.B. (2004). The Kensington Runestone: Approaching a research question holistically. Long Grove, IL: Waveland Press.
Mind Tools (n.d.). Porter’s Five Forces, Mind Tools Website. Available at http://www.mindtools.com/pages/article/newTMC_08.htm
Owen, S. (2006). The history and mystery of merger waves: A UK and US perspective. Sydney, Australia: University of New South Wales.
Peel, M.J., (1990) The Liquidation/Merger Alternative. US: Beard Books.
Reed, S.F. and Lajoux, A.R. (1998). The Art of M&A: A Merger Acquisition Buyout Guide. New York: McGraw-Hill Professional.
Jovanovick, M.N. and Jacquemin, A. (1997). European Economic Integration. New York: Routledge
