Cross-functional teams Term Paper Example | Topics and Well Written Essays - 3250 words

Cross-functional teams - Term Paper Example The sectors most affected by M&A activity have been service and knowledge based industries such as banking, insurance, pharmaceuticals, and leisure. Although M &A is a popular means of increasing or protecting market share, the strategy does not always deliver what is expected in terms of increased profitability or economies of scale. While the motives for mergers can variously be described as practical, psychological, or opportunist, the objective of all related M&A is to achieve synergy, or what is commonly referred to as the 2 +2 = 5 effect. However, as many organizations learn to their cost, the mere recognition of potential synergy is no guarantee that the combination will actually realize that potential (Cartwright, 1996). Understanding the Problems - Dysfunctional Organizations Most people have difficulty stating their organization’s strategy: what the organization wants to become, how it would like its people to behave, and what it will provide to which customers. In t he future, the reality is that the organization’s business and operating units march to priorities different from, if not contradictory to, those implied by its strategy. The majority of the people in an organization focus on day-to-day operational matters and their individual aspirations. Consequently, the strategy is never realized. Frustrated by the lack of forward progress, executives launch new communication, reorganization, process redesign, or technology initiatives. Everyone is doing more, and yet performance stagnates or even declines (Hammer, et al. 2001). Losing the Value of Mergers and Acquisitions AKPMG report found that, though 82% of respondents believed the deal they had transacted was a success, 83% of the same mergers failed to increase shareholder value. Of these transactions, 30% produced no discernible difference in shareholder value and 53% actually reduced value. Acquiring, merging, and demerging companies need long-term ways of enhancing shareholder va lue once the initial and obvious savings have been taken. But they usually focus on tactical integration, such as, organizational structure, support service or policies rather than on strategic integration in regards to customers, products, people or systems. However, to succeed both are needed (Kaplan, at el., (2001). The burning question remains – why do so many mergers fail to live up to a shareholder expectations? In the short term, many seemingly successful acquisitions look good, but disappointing productivity levels are often masked by onetime cost savings, asset disposals, or astute tax maneuvers that inflate balance-sheet figures during the first few years. Merger gains are notoriously difficult to assess. There are problems in selecting appropriate indices to make any assessment, as well as difficulties in deciding on a suitable measurement period. Typically the criteria selected by analysts are Profit-to-earnings ratios Stock-price fluctuations Managerial assessmen ts Irrespective of the evaluation method selected, the evidence on M&A performance is consistent in suggesting that a high proportion of M&A’