Mergers and Acquisitions

Mergers and acquisitions refer to the corporate strategies that deal with buying and selling or dividing and selling different companies due to the various reasons best known to the companies involved (Fan et al., 2001). The two words have different meanings, since the term merger, in permissible terms, refers to consolidation of two companies to form one entity in a legal way. On the other hand, the term acquisition refers to taking over of a company by another business entity in a legal way, where the former company establishes itself over the latter (King et al., 2004). In the recent years, mergers and acquisitions gained popularity in the corporate world especially with reference to the increasing level of globalization (Cartwright & Schoenberg, 2006). This can be noted by the number of merger and acquisition deals done every year within the country and outside of it. With this increased popularity, it is necessary to study recent merger and acquisition deals in order to understand the circumstances that lead to these acts and the performance of the companies afterwards.

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Circumstances That Led To the Merger of the US Airways and AMR Corp Group

Around this time last year, the US Airways merged with AMR Corp group to form a company known as American Airline Group Inc. This was not an activity of its kind, since other airlines have undergone mergers and acquisitions in the last few years. For example, Southwest Airways merged with Air Tran to form Southwest (SWA CEO), while Delta merged with Northwest to form Delta (DL CEO). Thus, the recent merger was not a surprise, as something like it had already been witnessed earlier on (Carey & Nicas, 2013).

Based on the reports from the two companies, the merger took place due to numerous reasons. For example, the two companies felt that merging would raise a strong alliance to form one of the largest airlines in the world. According to the CEOs, this act was expected to lead to higher profits than before. Thus, convenience and revenue maximization were the main reasons that have led to the businesses unification. The two parties believed that the pressures facing the two airline businesses would easily be dealt with through a merger. However, some believe that trade unions were the main drivers to the merge, since they fully backed the union, as fewer jobs would be lost than when the companies were on their own. Unlike other merger and acquisition cases, this was unique because of the stakeholders roles in influencing the final decision. However, it is worth to note that American Airlines had filed for bankruptcy before the merger had actually occurred. In order to facilitate the merger, the deal was finalized after the company was cleared from bankruptcy, meaning that financial insolvency was not the reason behind the coalition (Lawton, 2013).

Negative and Positive Effects of the Merger

Critics claimed that the union benefited AMR Airlines more, since it would be possible to rationalize the network route. In addition, the union could help in combining purchase, repair, and maintenance and could also help in dominating some routes. To the critics, this was not a bold move, but instead a defensive one, which was aimed at improving operational strategies. The companies senior officials defended the union, claiming that it was meant for benefiting the new companys consumers through better services, increased choices, and broader network among other reasons (Lawton, 2013).

Even before the union was finalized, critics had already started predicting the negative outcomes of it. Some of the negative effects that were anticipated by the critics included higher travelling prices, less choice, and reduced competition among others. The arguments about the negative outcomes were based on previous mergers and acquisitions in the airline industry, which lessened competition and led to higher profit margins. The arguments by the critics were not that wrong, since the new venture formed after the merger, has led to the increased competition with other airlines, such as Delta Airlines and United Continental Holdings (Lawton, 2013).

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Other critics argued that there exists a balance between customer effectiveness and business efficiency, which is helpful in increasing operational efficiency and decreasing the corresponding costs in the long run. This is achieved by comparing an earlier alliance between KLM and Air France, which was successful and led to financial benefits after one year. Critics argue that the new mergers in the US have many more benefits, as compared to the old ones, which were only approved because of the overcapacity. Since the old mergers were not for the mutual benefit, they have been usually resulting into price wars resulted and inability to deal with higher costs, leading to further negative effects (Lawton, 2013).

The Organizational Structure that Resulted from the Merger

of the US Airways and AMR Corp Group

After the merger, the new company acted under the leadership of Doug Parker. Unlike before the merger, the shareholders of the US Airways were able to receive 28% of the shares of the new company. However, shareholders of the other company were able to receive the rest only after a two-year restructuring and agreement on the merger. The new executives would have the advantage of receiving retention bonuses, which could only be given in the year 2015. The new airline created after the merger has about 600 jetliners and a group of energized employees, who could run its operations towards what the merger was intended to. Based on these facts, it is not wrong to state that the merger was a strategic decision of the US Airways, which had a long-term strategy of increasing its market share and its corporate strength, as well as of acquiring a broad customer base (Lawton, 2013).

Human Resource Management after the Merger

of the US Airways with AMR Corp Group

Before the merger, the two airlines were under different management. For example, the US Airways was under the leadership of Doug Parker, while American Airlines was under the leadership of Tom Horton. After the merger, a new company known as The New American appeared to be under Doug Parker, as the new CEO. Apart from Parker, the company constituted of the new executives, who would receive new bonuses after everything had been put in order. One of the reasons why Parker and not Tom Hortom bcame the new CEO is because the US Airways was in a better situation than AMR, which had just recovered from bankruptcy. Although most of the evidences would define this case as an acquisition, which is usually performed through the various ways, such as buying shares and equity, the partnership between the two companies was a merger (Lawton, 2013).

In conclusion, with the increased level of globalization, the quantity of mergers and acquisitions has also increased. The airline industry has not been left behind with notable mergers and acquisitions being seen over the years. One of the most recent mergers in the US is the merger of the US Airways and AMR to form The New American Airline. Just like any other merger, the new entity brought about various changes in the management and operations of a new business unit. Because of this, the merger had both positive and negative influences on the two organizations and their stakeholders.

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