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Drawbacks of Mergers

Cultural Differences: The chances for success are further hampered if the corporate cultures of the companies are very different. When a company is acquired, the decision is typically based on product or market synergies, but cultural differences are often ignored. It's a mistake to assume that people issues are easily overcome.
For example, employees at a target company might be accustomed to easy access to top management, flexible work schedules or even a relaxed dress code. These aspects of a working environment may not seem significant, but if new management removes them, the result can be resentment and shrinking productivity.

Management Styles: Various organization follow different types of management styles and in merger or acquisition these management styles don't meet, resulting in hampering the process as a whole and affecting the overall performance of the newly formed company. It should be ensured that the management style is defined clearly as this would affect the future success of the company.

Organisational Structure: In this case it has to be ensured that of the two organization which have merged to form a new company who would be heading the newly formed organization.

Can trigger monopoly law: Increasing one's market share is another major use of the merger, particularly amongst large corporations. By merging with major competitors, a company can come to dominate the market they compete in, giving them a free hand with regard to pricing and buyer incentives. This form of merger may cause problems when two dominating companies merge, as it may trigger litigation regarding monopoly laws.

Today, Bharti has over 100 million subscribers in India and has a small overseas presence in areas like Seychelles, Jersey Islands and Sri Lanka. The foray into these smaller markets came through a process of license bidding though the MTN deal could change a lot of things. MTN, which has 100 million subscribers across Africa, Middle East and Asia, will catapult Bharti to the top five in the global pecking order. According to experts, Bharti's foray into an emerging market like Africa is important. It helps in the company adopting a de-risking strategy in case the Indian markets start to slow down.

M&As in the Indian telecom sector started in the late 90s with companies like Bharti, Hutchison (now Vodafone), and Birla - AT&T (now Idea) starting to buy out smaller cellular operators with one or two circle operations. The first large M&A deal began with Tata Cellular merging with Birla-AT&T. This was followed by their acquisition of Escotel and RPG. Bharti made multiple acquisitions in the late 90's to 2002. Hutchison first acquired Facel in Gujarat, and then BPL, to expand its footprint in Maharashtra, Tamil Nadu and Kerala.

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* Contributed by: -
Prof. M. Guruprasad is Senior Faculty for Economics, Finance and Research, with AICAR Business School Raigad / Mumbai. He has more than 15 years of experience in research and educating / training management students. He was research scholar with the University of Mumbai. Worked as Executive in the Marketing research industry. Also Conducted Workshops and Training programmes. He has published articles in various industry magazines, newspapers and has initiated many discussions on academics.