2.3 M&a process

Mergers and acquisitions process refers to one of the most complex processes that can be used for the realization of financial goals. Before any process is started it is important to identify the final goal, ways and methods of achieving that. M&A's should be driven by strategic intent otherwise they will not succeed. Companies should have strong motives if they want to participate in M&A process, the desire to run the largest company should be motivated by strategic intent such as market power, efficiency, and exceed the fear of being swallowed up by competitors (Mirvis, 2011, p.163).

The most important strategy that companies consider is the firm's growth. When company realize that there is no autonomous growth or strategic alliance, the M&A process may start.

Based on the motives stated before Kummer and Steger, there are following stages of M&A process shown in Figure 1 :

Figure 1: The Process and Task Complexity of Mergers and Acquisitions (Kummer & Steger,2007, p.7)

It is not hard to notice that the task complexity is increasing with time. Some researchers distinguish three stages of M&A ( WEber ,2012,p.297) and some four (Garibadi, 2013, p.8). This difference can be explained by the fact that the first stage includes two pre-M&A phases as shown in Figure 1.

The first stage of a M&A process is planning which includes target selection and integration planning. During these phases a firm is trying to realize what it wants to achieve and then plans a possible strategy. During this stage it is possible to compare advantages and disadvantages of possible mergers ( Weber, 2012,p. 297). According to Garibaldi, planning process is very sensitive and highly influenced by outside factors such as rumors that may muddle employees at the very beginning ( Garibaldi,p.8). These phases are necessary steps, but are not guarantee to make the entire M&A transactions a success (Steiger& Kummer, p.6). The second stage is M&A transaction, includes negotiation process -when two companies start to interact with each other and due diligence- when a potential acquirer evaluates a target firm for acquisition (Straub, 2006, p.104). This stage is a risky one, because it has to deal with cultural differences ( Weber, 2012,p. 299). Garibaldi named this phase as the "waiting period for things to actually happen" ( Garibaldi,p.8). Top managers of the combining companies have to develop a common strategy before the integration stage. At this stage the signing of the contract has to be realized. It is important to predict possible problems that can harm the successful outcome of a combination ( Weber, 2012,p. 299). Every step in the M&A process has its importance. However, the key phase is the integration phase. The value has to be created here, therefore the success of merging companies at this stage is questionable. The post-M&A stage is stressful for employees, since they are directly affected by the organizational change (Weber, 2011,p.321). In other words, when employees face the changes in management style they feel uncertainty which may lead to extreme decisions. A significant number of qualified personnel can leave the organization, and then there may be little point in acquiring it (Pikula, , p.10). According to Weber, the human factor is very important. It is necessary to know how to deal with challenges and minimize their influence on the personnel ( Weber, 2012,p. 299). According to Simpson cited in Nguyen, the opportunity for mergers to fail is greatest during the integration process (Nguyen, 2003, p.447). The time for the integration process is usually underestimated, so estimation of the possible problems that may appear is usually weak and incorrect. It seems that at the pre-merger stage M&As are perceived as a good step for corporate growth, but at the post-merger stage top executives realize that they are performing poorly. Often it takes years for the merged companies to cope with organizational problems and start to work as a single whole. Often the organization remains split in two separate groups that frequently influence the synergy realization negatively (Steger, p.6). Such as cultural differences are still poorly understood by researchers, it is difficult to quantify and put them into the numbers, that is why measurement of possible outcome is usually underestimated (Weber, Tabara,2012, p.291).

New ideas, the ability to control employees and developing appropriate human resource knowledge are necessary. Hence the management plays an important role in all the stages of the M&A process (Garibaldi,p.8).

But the way in which acquisition decisions are made and how the process is managed are crucial for its success. Thus the integration stage is where the value has to be created and where M&A's have the highest tendency to fail.