Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.3/189083

Title

Managing reputation risk in mergers and acquisitions and Black Swan moments

Author(s)

McKie, David;  Galloway, Christopher

Abstract

The commonly used M&A 3-symbol abbreviation for Mergers and Acquisitions serves to mask a multitude of important differences. For a start, the verbal merger partially remove distinctions between an acquisition---with its connotations of a simple purchase---and a merger---with its more complex sense of two entities combining into a larger unified single entity. The frequent emphasis on acquisition, probably because it is easier to grasp (and a more straightforward concept), foregrounds finance in terms of making the purchase and doing the numbers to make that purchase profitable. Nevertheless the umbrella M&A term covers, in theory and in practice, crucial distinctions between an acquisition (as an unequal event with a senior controlling partner); a merger (as a meeting of approximate, if different) equals; and a merger in name (but an acquisition in practice). Each of these has distinct emotional associations even without such commonly associated adjectives as the overtly emotional terms 'friendly' or 'hostile'. These semantic connotations in favour of the simpler notion of acquisition, and the associated downgrading of feelings, and risk, that connect with them, work in prioritising the meaning and, therefore, importance, of the financial, seemingly logical and opportunity-rich calculations associated with M&A. Although these are semantic matters, they continue to matter beyond semantics in M&A. They matter because they tend to maintain the traditional justification of M&A in terms of such tangible economic outcomes as: increasing asset bases; producing more profit; improving competitive positions of new---merged/acquired---entities; providing economies, or opportunities, of scale; and anticipating reduced costs by rationalisation. Yet those traditional justifications can fail to take account of the revaluation of intangibles, and the recalculations of accounting measures, over the past two decades. Contemporary enterprises, as the former CEO of Citicorp, Walter Wriston, put it: 'run on intangible assets, such as information, research, development, brand equity, capacity for innovation, and human resources. Yet none of these intangible assets appear on a balance sheet. ... [so that] according to today's accounting practices, the worth of a brand name' is valueless( cited in Low & Kalafut, 2002, p. 97).

Publication type

Book chapter

Research centre

Swinburne University of Technology

Source

Challenges for communication management and public relations in international mergers and acquisitions / Ryszard Lawniczak (ed.), Chapter 3, pp. 46-62

Publication year

2011

Keyword(s)

Acquisitions;  Black swan moments;  Mergers;  Risk management

Publisher

Wydawnictwo Naukowe

ISBN

9788360251461

Publisher URL

http://en.pwn.pl/index.php/about-pwn.html

Copyright

Copyright © by Ryszard Lawniczak Poznan 2011.

Peer reviewed