To adapt itself to a sophisticated industry, and to be more competitive in industry, merger and acquisition (M&A hereafter) are considered efficient strategies for an enterprise to acquire more resources in finance, productivity, market share, or R&D. With an efficient M&A, an enterprise could reduce its cost in operation and improve efficiency as well. However, nowadays studies have shown that an enterprise does not operate as well as expected after merger, or, it even loses its competitiveness in the field. Therefore, M&A is considered a risky strategy for an enterprise, either in its growing or transitional phrase.
This study analyzes risks involved in the whole M&A process, from an embryonic decision-making stage going through the period two parties adjust and integrate to each other until the end of merger. This study argues that an enterprise could effectively reduce risks of merger if an independent internal audit department could audit and evaluate possible risks well.
This study chooses two companies of the Electronic Passive Component Industry as an object of research. It is found that the internal auditor familiarizes with company and the whole industry more than the third party. Hence, this study argues that the internal audit department plays a key role in the merger decision, whether it be risk-evaluation, risk- revelation or communication between the two parties. Failure to achieve the original goal, caused by the risks in the merger process, could indirectly result in the failure to achieve the other goals. The risks would expend and influence other aspects of the enterprise as well.
By checking the whole operative process could an enterprise minimize risks and enhance achievement in the whole M&A process. Auditorship done by an internal audit department or an internal auditor would avoid the drawbacks of that caused by an outside third party.