Corporate development

Résumé du document

Corporate or organizational development is process which allows a company or an organization to develop its internal capacity in order to be as efficient as possible. Long term or short terms (missions) are possible. We do have to understand that there is a definite relation between the achievements of the missions and objectives and the corporate development. Richard Beckhard has an interesting definition about organizational development: "a planned effort, organization-wide, managed from the top, to increase organization effectiveness and health, through planned interventions in the organization's processes, using behavioral science knowledge". Within the corporate topic, we will focus on mergers and acquisitions. Without creating a new entity, these processes allow a given company in a specific industry to grow very quickly. According to, organization development (OD), it is a complex strategy intended to change the beliefs, attitudes, values, and structure of organizations so that they can better adapt to new technologies, markets, and challenges.

Extraits

[...] If we just analyze the financial figures of both companies, we would have hard time to understand all the reasons of this merger. That's why we also must focus on the marketing aspects. This merger is considered as failure. (Since the purchase of Chrysler by Cerberus) The 2 companies were maybe too different to work together. (Cultural differences) Problems of reactivity from the American and flexibility for the German. (Cross-cultural management) Moreover, decisions were taken from both parts 2 C.E.O for one company!! Some graphic's figures shows quiet well the failure of this merger. [...]

[...] Meantime, Air France must diversify its services. Emergence of low-cost company is realty and Air France has to find new tools in order to compete on this important market. Synergies & Complementarities of services: KLM and Air France were not real competitors based on the fact they did not focus on the same markets and targets. Services of the 2 entities are quiet complementary and synergies are easy to observe. Rationalization of the maintenance: Those 2 companies becoming one make the maintenance easier to manage. [...]

[...] Analysts do not agree on several aspects. Some think that this option is in order to get more and more efficiency, other emphasize on the fact that this act would raise antitrust concerns among governments regulators. (They actually have the power to block it) The interest in this transaction and the confidence in shareholders is proved by the growth if the Reuter's end Thomson's stock. Regarding the recommendations, I would invest and buy share of this company based on the facts that it's a huge entity with strong bases and a lot of experience on this market. [...]

[...] Empire building: Managers have larger companies to manage and hence more power. Manager's compensation: In the past, certain executive management teams had their payout based on the total amount of profit of the company, instead of the profit per share, which would give the team a perverse incentive to buy companies to increase the total profit while decreasing the profit per share (which hurts the owners of the company, the shareholders); although some empirical studies show that compensation is linked to profitability rather than mere profits of the company. [...]

[...] We do observe 2 kinds of acquisition: Hostile and friendly. In general, it's a big group which buys a smaller one. It's also important to differentiate the 2 types of acquisition: (Source: wikipedia.org) Mergers represent the combination of 2 companies in order to become much bigger. This is in general a volunteer action. In those cases, it usually involves or “cash payment” in order to share the risks. If we have a closer look, it looks like a “takeover” but merger means new branding and new name. [...]