This chapter presents analyses and discusses the research findings from both literatures and the case of STX. Based on my review of the literature on success factors for M&A activity, this study have arrived at the following two key findings:
1) Fast and remarkable growth strategies of the firm.
This study shows Mergers and acquisitions (M&A) can be an effective strategy for the growth of firms even though M&A may not lead to positive performance outcomes in accordance with multiple studies; Ravenscraft and Scherer (1987) and Herman and Lowenstein (1988) examine the earnings performance after takeovers and conclude that merged firms have no operating improvements; Porter (1987) found that more then half of the acquisitions by major US companies failed. However many researches strongly support M&A as one of the most important growth strategies, the advantages of having this kind of M&A include achieving economies of scale, combining complementary resources, garnering tax advantages and eliminating inefficiencies (Coffee, Louis & Susan, 1988). Ravenscraft and Schere (1987) noted that the several most acquisitive conglomerate firms, witnessed returns about three times greater than the S&P500 between 1965 and 1983. Also Campa and Kedia (2002) describe diversification is a value-enhancing strategy. Therefore, STX has used M&A as a central post of its overall growth strategies, helping it achieve one of top-shipbuilding players in the world.
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2) STX faithfully tags along with critical success factors and theories of literates.
In the first stage, in order to select the right target for M&A, STX pursues fundamentally to achieve synergies of three types: financial, operational and managerial described by efficiency theory. Besides, the firm had instinctively reached the four ‗must-do‘ factors researched by
Rockwell (1968) in the planning namely identifying merger objectives, specifying gains for owners, checking management ability and seeking a good fit, and also deeply considered the six factors such as the continuous involvement of head management, defining the business area, analyzing performance factors, resolving problem early, moving M&A activities in the
right advances at the right time, and absorbing human resource with care.
Figure 17 Relationship between literatures and STX M&A activity
In the second stage, Mr. Kang had took personal commend of every STX‘s M&A activities in order to achieve combination targets due to being the right leadership, structuring the integration team, and detailed plan in terms of communication, integration, and people issue
Efficiency theory
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since many recent researches diagnose management commitment and support, competence of project team, flexible and comprehensive integration plan, learning organization, and manager capabilities are the most essential success factors of M&A. As a result, STX after M&A had enjoyed taking advantages of cross-subsidize products, economics of scale and scope which result in higher market power and the owner of STX became a man of wealth described by Monopoly theory and Empire-building theory.
The two key findings reveal a knowledge gap in the literature
In accordance with literature researches (Lubatkin 1983; Trautwein 1990; Cox 2006), the theories of merger motives are separated into two categories: 1) focusing on shareholders‘
interest, 2) emphasizing on manager‘s interest and their deviations from shareholder value maximization as shown below
This study, however, is observed on a knowledge gap in the literature between shareholder‘s interest and managers‘ one since STX‘s case have used several M&A as a primary pillar of their growth strategies, which helps definitely the two stakeholders achieve their maximized benefits since M&A deals has to a great expanse been driven by the greatest synergies and
Merger as rational choice
Merger benefits bidder's shareholders
Merger benefits Mangers
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market power in various different segments. Therefore, the case of STX shows the intersection area of two circles as shown below whose area could be new ‗Merger motives‘
for both shareholders‘ benefit and managers‘ one which would be needed as another independent theory in ‗Merger motives‘ theories conducted by Lubatkin, 1983.
Figure 18 The intersection of merger benefits
Lessons from the case of STX
Mergers and acquisition is an endless happening in the business world, and always critical issues for study since many of literatures have shown that most deals destroy value for the acquirer‘s shareholders. Although many acquisitive companies do destroy value of their firm (Ravenscraft & Scherer, 1987; Herman & Lowenstein 1988; Porter, 1987), some of the world‘s best performing corporations are also unusually acquisitive (Ravenscraft and Schere, 1987). Besides, M&A have been an important strategic tool for well over a century (Langford and Brown, 2004). So M&A is a well-know way for businesses growth, not secret business tools. However key success factors after reviewing many literatures conducted by various
Merger benefits bidder’s shareholders
Merger benefits Managers
Merger benefits
both shareholders and Managers
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accredited researchers and scholars on a particular M&A do exist.
In order to learn lessons from STX‘s case as one of the most successful acquirers, rivals should consider keeping track of STX activities which might not be an absolutely sure-fire formula for M&A success, but many businesses could be using this case as an important reference material. So they could replicate STX‘ successful strategies only if they follow STX‘s success factors and principles: i) focusing on synergies and diversification rather than goals of savings, ii) boosting the acquired company's value, and iii) avoiding selecting the wrong targets, overpay and neglect their pre-existing businesses due to a winner curse and an excitement of post-deal integration. Besides, the chairman in STX group is so good with figures because he was CFO (Chief Financial Officer) at previous company, Ssangyong heavy industry. Because of this reason, Mr. Kang had took the leading role in dealing for every its M&A activities due to management commitment, support, and manager capabilities are the most necessary success factors of M&A.
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