Mergers and Acquisitions have been going on in the business world for God knows how long therefore you'll naturally expect it to boast of glorious and happy multinationals acquiring their subordinate companies, which in reality should maximize shareholder wealth. Studies,short term and long term, show M & A activities do not exactly increase shareholder profitability of the acquiring company but definitely is a boost for the shareholders of the acquiree.
This brings me back to my initial question, is it really worth it?. In my opinion M & A is a survival strategy meaning, multinationals see this as a game and there has to be winners and losers therefore gaining market power is what puts them ahead of the game. If not, why would they add soo much wealth to the acquirees' shareholder and loose some of their own shareholders' wealth?. It's all about the market powern
A good example of this is the proposed acquisition of BSkyB by News Corp.. The share value of BskyB has increased merely since talks of an acquisition emerged and it's still increasing. Meanwhile share value of News Corp has dropped, this just proves the point made earlier regarding the motives of M & A. In this case, it's obvious it's mainly for the market power as the reason provided by Rupert Murdoch the CEO of News Corp. was mainly the strategic important asset BSkyB offered. The asset being News Corp's penetration into the UK market as BSkyB is renowned in the region.
Bearing this in mind, although studies show the acquirers' in M & A activities tend to loose shareholder value in the long run. I believe in a situation like this where it is used as a penetration mechanism in a highly progressed environment such as BSkyB in the UK, the long run profitability are quite feasible therefore its a win win situation.
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