Question

1) Provide examples from the real world for successful and unsuccessful mergers and acquisitions cases in recent years and state the specific reasons behind their success or failure. (Do not provide general reasons behind success or failure & only one example should be provided for each case, any examples given dated before the year 2000 will not be considered). Uber & Careem company or facebook & instagram  

Answer 1

SUCCESS AND IMPACT OF MERGER BETWEEN UBER AND CAREEM

1.Monopoly leading to increased fare rates

Uber and Careem are the two leading Taxi Hailing companies. Their merger would cause a void in the taxi hailing industry. Due to which they will have the monopoly. They can increase the fare as much as they want and everyone has to bear those high rates as there won’t be any alternative available.

However, some other local company will surely fill this void later to provide a better alternative. But, till then it will be the customers who would be at lost. So, it won’t be wrong to say that the commuters of MENA region must be ready to face high Fare Rates in case the merger takes place.

2.Room for new competitors

As I earlier mentioned about the void in the Taxi Hailing sector, this could be a golden opportunity for the small, less-recognised Taxi hailing services to rise to the occasion and evolve to become a more cost-efficient, reliable, and local alternative to the Uber-Careem merger.

Another factor which would work in the favour of the small hailing services is the local sentiments. One of the major reason why Careem was such a successful venture was the fact that it was based in Dubai and everyone in the MENA region treated it as their own company.

On the other hand, the riders in the MENA region always saw Uber as an outsider. Now, if this merger takes place then Careem will no longer have the “local company” tag.

This scenario would be nothing less than a golden chance for the other local hailing services. The void in the competition and the absence of a local service provider will set a great platform for a small taxi-hailing app to take off.

3.More advanced service

The only positive that customer may get from this potential merger is a more advanced service. Uber and Careem both are big players when it comes to Taxi Hailing services in the MENA region. Both the companies have proved their mettle with their seamless services and features.

If these two decide to merge then the one thing which people will expect at least would be a better service than before. This will also raise the customer’s expectation and subsequently the pressure on the Uber-Careem joint venture to deliver a quality service.

4.Impact of merger on careem’s employees

All the mergers usually have negative impact on the employees. It is because two companies merge to streamline their workforce and finances which eventually means laying off some staff.

Usually, employees start looking for a new job soon after the announcement of a merger. Moreover, there are many other factors which affect employees in which the major one is the office culture.

Whenever there is a merger you will observe a change in the office culture. Some employees may fail to adapt to this change. Especially, in the case of Careem, since it is a local company for MENA region it would surely have a culture that everyone would be comfortable with.

The inclusion Uber would result in introduction of western office culture which could be exactly opposite to that of the Middle Eastern culture. Due to which the local employees could face a plethora of problems.

5.Easy for uber to expand & escape legal matters

It is no longer a hidden fact that Uber has been a part of several controversies. To make the matters worse these includes some serious legal controversies which also includes heinous crimes such as rapes and murders. Uber faces full and partial bans in many countries.

With such a track record it will always be difficult for Uber to set up its business in MENA region which includes countries like UAE and Saudi Arabia which are known for their strict laws.

So, this potential merger with Careem could possibly be a smart move from the Uber’s end. If they merge then the chances of them getting banned will be minimum as Careem is a native taxi hailing service.

6.Is merger a desperate measure for the IPO?

Uber is planning to go public in 2021. That is, they will provide IPO by 2021. So, that anyone could buy Uber’s shares. Now, the catch with IPO is that you need to have a continuous growth as a company.

Whereas, the Uber has been very inconsistent all thanks to frequent legal matters and the random nature of the cab market. That is the reason why Uber is looking for consistency. Merging up with Careem can be excellent plan to increase their consistency which would later help them in their IPO.

Conclusion

Uber-Careem deal if it takes place then it will have huge impact on the Taxi Hailing eco-system of MENA region. We’ve already discussed the various impact that it can have.

However, the silver lining is that the merger will cause a void in the MENA region Taxi Hailing ecosystem. This void would be a humungous opportunity for the local taxi hailing providers to enter in the arena of taxi services.

The major advantage of these firms will be that they can offer less Fare Rates than the Uber-Careem joint venture. Moreover, they can also play the “local card”. They will have an advantage as the new firm to emerge as a new local indigenous firm.

Only time will tell what would happen in the future, whether the deal will take place or not? If it takes place then will be a success or not? What impacts it will have on the customers and existing employees?

And what it will mean to the emerging taxi hailing services in MENA region? We have discussed, contemplated, and carefully gave our insights on all these questions. I hope these insights would help you to take your next big decision.