The Role of restructuring strategies for the M&A integration

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Abstract

Due to the evolution of economic activity at the global level in general indicates its tendency to organize and create large economic entities to face global competition and deal with globalization. This trend is considered by large entities for their integration into the global economy in terms of quality and export at competitive prices.
This has led to the trend towards integration between companies that work in the same industrial and economic activities to create large institutional entities that follow the latest in various industries and create a greater weight in financially & technologies according international standards.

Merger & Acquisition

Some studies define “Merger” as the process done through combine “melting” the company and transferring its funds to another company existing or by way of blending their two or more companies (properties, assets, funds) and establish a new company.
Also the merger does not necessarily have to be between companies of the same type, a company may be merged with another type, whether the difference is in terms of purposes or in terms of the legal entity.
And about “Acquisition” some studies define it when an independent company controlling and acquire the shares of another company so that it has the opportunity to control the board of directors and take decisions because they own the largest share of shares, while both of them will retain their names and have their legal personality separately for the benefits shareholders.

General advantages of M&A

– Optimal utilization of the resources of both companies
– Achievement of economic stability for both companies after integrating them into one large entity that can more compete.
– Provides an opportunity to maximize the market share and the profit for the new entity through rapid growth and diversification of products and activities.

The disadvantages that may result from M&A

– Different organizational structure of employees, wage systems, bonuses, incentives and job titles are a big issue must solve by a plan must be prepared to balance staff structure.

– Surplus in employment in some specialties and some administrative levels as a result of the merger.

Restructuring

Companies should to make restructuring processes when they face some of the problems that prevent them from continuing within the market and competition more like low management efficiency, good conduct, honesty and integrity, lack of cash flows, shortage of owners’ equity due to bleeding losses, increase in the volume of bank overdrafts, Employment Low labor efficiency.

Conclusion

Based on previous studies found that integration is beneficial to all parties, especially if two companies of the same activity or activity complement the main activity of the merging company, and to ensure its success must be supported by an effective restructuring of the company through the organizational restructuring of employment in terms of number and selection of the good ones and work on their training And attention to cadres and processes of restructuring of departments and sectors, either by abolishing obsolete departments or the introduction of management keep pace with modern technology.
After using the new company to restructure the financial assets sold by the merged company, which does not require the new activity of the entity resulting from the merger, which leads to the existence of liquidity can be used to inject investments and improve the financial position of the company and give it the opportunity to compete with other foreign companies in the market, Under the FTA.
According Studies some mistakes occur in mergers process, needed to avoid, is the failure to evaluate the assets with its real value which is also Anti- the Principles of transparency & disclosure, in a manner that is appropriate to the vision and purpose of the company and to give decision makers the right decision on the appropriate strategy for integration for example, there are cases Assets should be evaluated by their market value not by their book value.
During restructuring processes, post M&A transaction, the stability of the work environment not taken into consideration, when employees are informed that the company is on the way to consolidation or restructuring. The first thing that occurs to a worker’s thinking is that he is at a certain stage of unemployment, and the lack of confidence in the management of the company, which will end its work at any time, so some studies have confirmed the need to prepare the workers structure of the company whether to proceed with a merger and try as far as possible away from the restructuring of staff by disposal or reduce the number of, but that their training and redistribution have been undertaken To the rest of the departments and sectors that may be established or compensated appropriate compensation that provides the worker to establish their own small project also giving them training to how manage and maintain this project,
In other hand for, in the long run M&A and the restructuring Strategies will reduce the unemployment problem as a result of maximizing its profitability and expanding the market will create new jobs, contrary to the common practice that mergers and acquisitions will lead to unemployment and layoffs.

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