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Mergers and Acquisitions

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It is not uncommon to see businesses from various parts of the world merging for various reasons, among them to avoid incurring massive losses. In the United States, for instance, mergers and acquisitions of companies are normally waiting with baited breath, and they often happen. In fact, the US has a history of businesses merging, but other deals fail to materialize. Economic experts have varied opinions on the impact of this action with some strongly opposed while others holding a different view. In this paper, though, the focus is some companies that have participated in the merger and acquisition in the recent months. Here, the circumstances that led to the merger or acquisition, the effects and the structural change have been analyzed. In order to do this, this paper critically looks at the merger and acquisition of Nokia by Microsoft.


Microsoft is a company dealing with the designing, developing and selling computer applications and accessories as well as personal computers. This is a firm that has been engaged in a long list of acquisitions. It is involved in acquisition in almost every field having acquired Prodicance software recently. Other includes MarketPilot and Storsimple to name but a few, and it seems this is not the end of these mergers. Nokia on the other hand is a mobile phone company dealing with designing and selling these gadgets in almost every part of the world. Early September 2013, the two companies announced that plans were underway for Nokia to merge with Microsoft. According to many experts, the reason for Nokia’s decision was to ensure they remained relevant in the smartphone business. This is amidst growing concern over its ability to compete with the top giants of Google and Apple (Crump, 2014).

According to Crump (2014) Nokia’s move to merge with a globally reputable company was necessitated by the increasing market war between the major players. This is major circumstance that led to this merger though none of the two sides has come out to address this notion. For instance, Apple’s dominance posed a real threat to Nokia’s survival thus the need to have some partnership with Microsoft. Even though both sides did not publicly announce the inner details of the merger, experts strongly believe that Nokia’s decision was a wise one, and it resulted in preventing it from becoming bankrupt. Others possess a different view with another speculating that Nokia’s supposed bankruptcy could turn to be an advantage to Microsoft. This is because Nokia’s clientele seemed intact, and since Microsoft bought the handset portion, it would be advantageous.

Secondly, it is highly speculated that Nokia’s future did not look promising enough, especially due to lack of capacity to withstand competition on the devices. The fears of abrupt failure were imminent and a decision needed to be made rather quickly. This approach by Nokia is very common with other companies that tend to prefer acquisition or merger to bankruptcy. According to Borchert (2011), merger of companies is normally done with the aim of letting both companies benefit. For instance, in the Nokia-Microsoft merger, Microsoft is expected to benefit from the Nokia’s well-maintained image. Similarly, Nokia’s infrastructure will be saved as will be its image because reports of bankruptcy would not have gone well with its clients.

Further positive effects that come with a merger or acquisition of companies include an increase of clientele portfolio. Normally, this happens because both companies have been in business, mostly different ones, thus having an already-established platform. In short, when two companies are merging, both are involved in either the same of different business meaning that each could benefit by converting the other’s clients to join the new alliance. In the case of Microsoft, the Nokia customers will end up being Microsoft’s if they are offered services in a similar way as Nokia did.

Nonetheless, it is not always that these mergers prove beneficial to both parties with Deng, Kang  and Low (2013) noting that they tend to leave customers with skepticism. This is normally the case if the company is not acquired wholly. In short, if a company’s is acquired by a certain portion, the remaining services could be adversely affected because of the credibility issues. For instance, in this case, the Nokia company did not sell off its rights, but rather was left with the “Here” mapping services. It will prove to be pretty hard for the customers to have unwavering loyalty to its clients since they are not assured of permanence.

Another negative effect of merger and acquisition is that one company- the one buying the other- tends to benefit more than the seller. Deng et al. (2013) asserted that many times, the figure many companies agree on cannot in any way reflect the initial effort and capital used in the development of some services or products. For instance, Microsoft will benefit from the Nokia’s merger by owning the smart devices, mobile, employees and other accessories. In the end, it is Microsoft that will benefit more because, firstly, there will be no need to re-train employees since they are included in the deal. Secondly, the market is already established meaning Microsoft will do little, if any, marketing at all.

Also, the negative effects resulting from these mergers include the inability by the acquiring company to maintain the standards. Even though some companies do get employees as part of the deal, Hannah & Mueller (2006) noted that some quit for various reasons. As a result, the company is left grappling with the complaints from the customers who were previously used to seamless services. Thus, the complaints keep increasing, and the situation remains unimproved, many clients tend to seek services elsewhere leaving the company with massive losses.

From this merger, the organizational structure will see Microsoft take the managerial role since Nokia has not surrendered a significant portion of its ownership. Hence, Nokia will not have equal rights with Microsoft and this is virtually a case of total ownership. As a result of this new structural development, there will be differences with one of them being the top officials. Now that Nokia is virtually owned by Microsoft, the latter’s executives will now have more control over Nokia operations. The employees will no longer take instructions from the Nokia bosses; the Microsoft chiefs are their new bosses. Further, the team-leaders from Microsoft will see an increased number to manage while results from Nokia will be different.

In regard to the modification of employees, it has been stated that the Nokia-Microsoft deal involved the acquisition of staff as well. Usually, this helps in ensuring that the acquiring company does not hire new people. Instead, the people whose competence and expertise were used in the development of various technologies are maintained (Hannah & Mueller, 2006). Whereas the above statement is the speculated from the fact that employees were in the deal, both companies remained non-committal on the matter thus leaving it for speculation.

In conclusion, merger and acquisition of businesses is a practice quite common between companies whereby each has its reasons. Firstly, some opt for this step to avoid bankruptcy while others choose it as a way of advancing technology. As a decision is made to take this step, it is important to ensure all the necessary measures are in place. Merger normally sees both companies benefit, and the acquired company ought to have the right legal advice on the number of its assets. Once a merger is completed, many times the organizational structure normally changes with the exception of a few cases. Irrespective of the reasons for a merger, the important thing is to ensure that none of the parties capitalize on the unseen weakness.


Borchert, O. (2011). Resource-Based Theory: Creating and Sustaining Competitive Advantage.

Journal of Marketing Management, 27(2), 1041-1044.

Crump, P. (2014, April 30). Microsoft-Nokia Merger Brings New Competition to Smartphone

 Wars. Retrieved November 15, 2014, from

Deng, X., Kang, J., & Low, B. (2013). Corporate social responsibility and stakeholder value

maximization: Evidence from mergers. Journal of Financial Economics, 110(1), 87-109.

Hannah, L., & Mueller, D. (2006). The Determinants and Effects of Mergers: An International

Comparison. The Business History Review, 23(2), 568-568.