A Strategic merger usually refers to long term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in the long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process.
The nature of the market for corporate control changed suddenly in 1990. The leveraged buyouts of the 1980s, however, showed investors the power of improved board oversight. Institutional investors, such as pension funds and insurance companies, began to demand that directors take a more active role in the governance of corporations. The large stockholdings of institutional investors meant that corporate boards had to listen to their concerns. Responding to these demands, boards became much more proactive. Directors of poorly per-forming corporations began to challenge the CEOs, asking about their plans for improving performance. By the mid-1990s takeover activity was increasing, though the nature of the transactions differed significantly from those of the 1980s. Rather than raiders identifying and acquiring inefficiently operated companies, takeovers were motivated by strategic concerns. Companies tried to keep up with shifts in markets by identifying acquisition targets that would allow them to track those market changes. Companies can more quickly make these shifts by buying an existing company rather than by developing a subsidiary from scratch. The prevalence of strategic restructurings in the 1990s reflects the need to maintain competitiveness as markets and technologies change. During the 1980s many inefficient companies were absorbed or dissolved. In the 1990s increased competition and stronger internal control systems reduced the need for disciplinary restructurings. The earlier restructuring transactions moved corporations to a reasonable level of efficiency; today’s restructurings try to maintain that competitiveness and prepare companies to be competitive in the future.
