Synergie effects of mergers and acquisitions in the telecommunicaitons industry

On making this announcement , Avaya CEO Louis D 'Ambrosio said that the merger would enhance service delivery in communications solutions due to pooling of resources and know-how (Avaya , 2007 . Reduction in costs associated with economies of scale is also some of the benefits that Avaya , TPG and Silver Lake are going to obtain . As a result , Avaya will become stronger and more aggressive in the market (Follet , 2007 : 1

Benefits of reduction in cost come in handy now that companies have to spend more in research and development to keep their products going

in the market . Given the soaring costs of research and development out of the global need advance technology , telecommunication firms often find it hard to make it on their own (Kang , 2001 : 38 . M As provide a convenient solution to enhance innovation and development . Companies can pool together financial resources , manpower and technology making it easier for them to maneuver through the challenges rather than when they could have done it alone (Farrell and Shapiro , 2001 : 689-71 Consequently , more innovative products and services are produced (Matsusaka , 1993 : 371 . This not only works to the benefit of the company from increased sales but also gives consumers better products to choose from (Clemente and Greenspan , 1998

Financing synergies

Financing synergies mostly result from the large asset base that is likely to emerge following M A . This means that the companies can put together resources that can be used as security in accessing credit (Eckbo , 1983 . Increased credit-worthiness means that the newly formed company can now access finances for development . Smaller companies that cannot afford certain amounts of credit have been known to take advantage of this synergy effect to advance their businesses (Reel and Lajoux , 1998 : 42 . For instance , when McCaw Cellullar Communications was sold to AT T in...