Practicing Organization Development: Leading Transformation and Change, 4th Edition

Chapter Twenty-OneMergers and Acquisitions

Still Crazy After All These Years

Mitchell Lee Marks and Philip H. Mirvis

Mergers and acquisitions (M&A) are a way for organizations to maintain their competitiveness and generate transformational change in an increasingly global market place (Faulkner, Teerikangas, and Joseph 2012). They are used to achieve economies of scale, diversification, and economic growth (Giessner, Ullrich, and van Dick 2012). In the 2010 edition of this handbook, we anticipated that the easing of the global economic crisis would stimulate an increase in M&A activity worldwide (Marks and Mirvis 2010b). We got it right: M&A activity is growing at a pace not seen since 2007, and the number of global deals is up 53 percent from 2013 to 2014 (Mattioli 2014).

A variety of trends are fueling the M&A boom. Some are financial. Interest rates are low, many firms have large stockpiles of cash, and some companies, particularly in health care, are making overseas acquisitions to take advantage of lower tax rates. Psychological factors also are contributing to the wave of M&A activity. Major deals spawn “copy-cat” combinations as CEOs want to eat before being eaten. In the telecom and media sector, A&T's $50 billion acquisition of DirectTV was followed by Charter's $55 billion offer to take over Time Warner Cable. And some deals are done for strategic reasons. Tech firms like Google and Facebook use acquisitions as a proxy for internal R&D efforts.

Despite this flurry ...