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MERGERS & ACQUISITIONS
Conflict of interest issues (managers vs shareholders)
• When entering into a negotiation for a potential
merger/acquisition transaction, managers may experience a
conflict of interest between acting in their own best interest
and acting in the interest of the shareholders (which is their
responsibility). This usually occurs when for example the
manager sees the merger/acquisition transaction to be an
opportunity to advance his/ her career (by being involved in
a larger corporation or an industry which he/ she may have
an interest in).
• The transaction may not necessarily maximise shareholder
wealth but the management will pursue the opportunity in
order to benefit themselves. It should be noted that such
unethical motivation for a merger/acquisition is one of the
key reasons for failed transactions. For this reason amongst
others, the pre- and post-acquisition reviews are important
procedures for consideration.
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