Performance Measurement in a Post Merger Integration Process Essay

Performance Measurement in a Post Merger Integration Process - Essay Example The objective of any merger is to increase the value of the enterprise which means the there is always an objective that helps the company to come up with such a strategy to merger with another company. This is mostly seen as a long term strategy culminating from inside research in the market as there is not firm which would like to lose its identity in the market as a result of the merger. (ndrade 2001, p. 106; Ronald and Suzanne 2000, p. 5) In the recent past, there have been increasing interest on the issue of mergers. Many people have tried to look at the effect of those mergers in the face of looking who are the real winners and who are the real losers of merger. There have been many studies which have been looking closely into the issue of outcome of the mergers and acquisitions. The outcome of these two processes has been evaluated on many grounds from economic, communication, and other performance standards. (Caves 1999, p. 4; Lipin 2000, p.4) Once we realize that the objective of any merger is to increase the value of the enterprise in the market in order to create a formidable force the can compete effectively with others in the market, it will be easy for us to analyse then how does a merger affect the operation of each firms after they merge. This paper will concentrate on assessing the post merger effects on trust building performance and communication in the new enterprise. It will review various literature and findings that have come from many researches. (Ghosh 2001, p. 13) Outcome of mergers Many studies that have conducted research on mergers and acquisition have basically centred on some of the interesting characteristics of the mergers. They have been able to categorize the effect of merge on three broad classes. The first class consist of measureing performance after a merger based on share price. The second one has categories it on profitability while the class takes in many studied which have used other effect of merger success. (Paul 2002, p. 49) As we mentioned earlier the aim of any merger is to ensure that there is success of a business. This success should not only be measured in term of finical success but also in the degree of integration the two firms. In this regard cultural integration is one of the most important aspects that help the merger to succeed. Whether a merger can be considered a success based on the financial implication depends on many factors including the benchmark that is used to evaluate the merger. Many studies have concentrated on the share price of the firm pre and post merger as a measure of success in themes. This is often based on the confidence the investors will have on the merger. In this regard, the revenue of the firm is used as bench mark for evaluating the success of the firm since the dynamic trend in the share price of a firm will depend on the revenue collection of the firm. (Sitkin 1996, p. 17; Kaplan 2000, p. 243) Based on the financial performance of the mergers, studies that have been carried out shows that 82% of all mergers evaluated have shown success in the share price and economic performance. However it has also been shown that more that 50% of all mergers do not meet the expectations of the investors with majority of them failing to attain the objectives of the new merger. Once a merger is planned, there