Essays on Strategic Corporate Finance, Mergers and acquisitions

In the contemporary business environment, mergers and acquisitions comprise an integral part of business development. The process of globalization stimulates mergers and acquisitions of companies internationally. In such a situation, mergers and acquisitions become effective tools with the help of which organizations can enhance their position in the company. At the same time, mergers and acquisitions raises a number of problems in face of organizations, such as the problem of the effective restructuring and the maintenance of stable organizational culture and structure. On the other hand, mergers and acquisitions can have a number of benefits organizations can enjoy due to the effective use of the full potential of organizations to merge or to acquire. In such a situation, it is up to organizations whether to merge or to acquire other organizations or not. At this point, it is possible to refer to the case of the possible merger of T-Mobile and Sprint, which may have a considerable impact on both organizations and on their shareholders. In fact, the merger of T-Mobile and Sprint may have different effects and organizations should consider carefully possible effects of the decision to merge but it is obvious that the merger will expand the market share of the new organization and, if completed properly, the merger can enhance the position of the new company in the market consistently.

The impact of merger on T-Mobile shareholders

Basically, the merger of T-Mobile and Sprint could have a positive impact on T-Mobile shareholders because T-Mobile will get access to the 4-G technology, which could be implemented and used by T-Mobile. In such a way, the company can use the new technology and improve consistently its position in the market. The use of new technology will definitely attract new customers as well as provide ample opportunities for existing customers to order the new service. The expansion of services being delivered by T-Mobile to its customers is likely to increase its revenues and profits. Obviously, in such a situation, shareholders of T-Mobile can benefit from the merger because the increase of revenues of the company and its profits will naturally contribute to their own benefits and profits.

At the same time, the merger raises certain risks because it is unclear how successful the merger can be, especially, today, when the economic situation is uncertain and unstable. For instance, the economic recession and financial crisis can affect consistently the position of both companies. Therefore, if T-Mobile fails to integrate and restructure successfully, the new company is likely to face considerable problems, especially in the highly competitive environment.

The impact of merger on Sprint shareholders

As for shareholders of Sprint, they can also benefit consistently from the merger of T-Mobile and Sprint. In this respect, it is important to place emphasis on the fact that the merger can open new markets for Sprint. In fact, the merger can open the market, which was and still is occupied by T-Mobile. The expansion of the market share will open larger opportunities for the company to enter new markets and increase its revenues substantially.

At the same time, it is important to point out that one of the major issues for Sprint is which company will take control over the new company after the merger of the two companies. In this regard, Sprint has an opportunity to take control over the new company, which is apparently the best option for Sprint’s shareholders. In fact, Sprint’s shareholders can improve their position due to the merger with T-Mobile. However, T-Mobile still has ample opportunities to preserve control over the new company. Therefore, the control of Sprint’s shareholders over the new company is still under a question.

The financial condition of both corporations

Shareholders of both companies should take into consideration their current financial conditions. In this regard, it is worth mentioning the fact that the financial position of T-Mobile is very strong due to its assets and position of the company in the EU market as well as its successful entering the US market. In such a situation, the merger of T-Mobile and Sprint can enhance the financial position of the company even more because the company will gain new assets. At the moment, the company has sufficient financial resources to maintain its position in the market and to develop the new markets due to the new assets acquired after the merger with Sprint.

As for Sprint, the company is growing and, at the moment, the company apparently needs substantial investments. To put it in simple works, the company has advanced technologies and it needs substantial financial resources to increase sales of its products and services and to expand its market share. In such a way, the company can get essential investments from T-Mobile, whereas T-Mobile can get access to new technologies. In both cases, Sprint and T-Mobile can benefit and improve their financial position, on the condition of the effective restructuring of the new company.

Benefits of the merger

In such a context, benefits of the new company created after the merger of T-Mobile and Sprint are obvious. First of all, the merger will enhance the position of both companies in financial terms as well as in terms of the acquisition of new, prospective assets. To put it more precisely, T-Mobile will obtain access to 4-G technology that can open larger opportunities for the accelerated business development of the company. As for Sprint, the company will obtain access to substantial financial resources of T-Mobile. Therefore, both companies will benefit from the merger and the merger will enhance consistently the position of the new company in the market. In such a way, the merger opens larger opportunities for the new company to expand its market share, to improve its financial position, and to accelerate its business development.

Potential pitfalls of the merger

On the other hand, the merger raises considerable risks and threats, which can annihilate positive effects of the merger. In this respect, it is worth mentioning the fact that the merger raises the problem of restructuring of the new company. In fact, the new company will need to integrate organizational units and employees working in both organizations. At this point, it is obvious that T-Mobile and Sprint have different organizational structures. Therefore, the new company will need to elaborate the new organizational structure, which can meet needs of the new organization. However, restructuring may lead to considerable structural changes, including job cuts and deterioration of the position of some employees.

The latter is likely to increase the risk of the deterioration of the organizational culture. In fact, the new company will need to develop the new organizational culture. The healthy organizational culture is essential for the successful marketing performance of the new company. However, restructuring can cause internal conflicts, dissatisfaction of employees with their position in the new company and their uncertainty in their future in the new company. As a result, the poor organizational culture can undermine the organizational performance of the new company.

Conclusion

Thus, the merger of T-Mobile and Sprint can have both positive and negative effects on the organizational performance and position of the new organization. Nevertheless, benefits of the merger are substantial and worth taking the risk because T-Mobile and Sprint can enhance their position in the market. T-Mobile can get access to 4-G technology and use it to improve its position in the market, whereas Sprint can get the financial support of T-Mobile. However, the new company needs to complete restructuring successfully.