Case Study on Decision-Making Process for M&A in Small and Medium Companies

Purpose – A rapidly changing business environment places great demands on small and medium-sized enterprises (SMEs). These SMEs need to find strategic alternatives for continued growth and, ultimately, survival. Thus, mergers and acquisitions (M&A) are deemed an acceptable solution. Research to date has dealt with M&A in major organizations and focused on post merger integration (PMI). Our study focuses on SMEs, as they are relatively new and unknown to the public. Therefore, this study highlights successful M&A and decision making for SMEs through a case study analysis. Research design, data, and methodology – For this study, we examined an M&A case between company S, which produces cell phone parts, and company P, which produces SSD cases. We reviewed theories and previous studies in M&A literature. We comprehensively examined the decision-making procedure at each M&A stage, describing the situation of the buying company and the selling company from the period of the M&A announcement through deal completion. In addition, we conducted interviews with both companies. The data regarding this case study were collected through interviews with managers of both companies who actively participated in the M&A process. When necessary, we asked them about additional relevant information during the interviews. Results – The result of the M&A between company S and company P was deemed acceptable with the exception of the long negotiation period. However, company S was not able to prepare for PMI after the acquisition due to a controversy over acquisition values. Moreover, the employees of the newly formed company, especially those who came from company P, complained about the M&A and attempted to leave. Thus, implications for successful M&As of SMEs are as follows: First, the procedural compliance of the M&A is needed. Second, support is needed from the CEO for the working group, rather than excessive intervention during due diligence. Third, the right, tal