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Why Companies Go For Mergers and Acquisitions

Why Companies Go For Mergers and Acquisitions
What is meant by Mergers and Acquisitions? This is a general term used to refer to the #amalgamation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. Mergers and acquisitions refers to the buying, selling and combining of different companies to aid a company in a specific industry to grow quickly without having to create another business entity. Growth due to Internal and #External Expansion: A  business might grow either by #internal expansion or by external expansion. In the case of internal expansion, a firm grows progressively through procurement of new #assets, substitution of the technologically out-dated equipments and the setting up of new product line. But in external expansion, a firm secures a running business and grows overnight through corporate combinations. These combinations are in the form of mergers, acquisitions, amalgamations and takeovers and have now become important features of #corporate restructuring. Why Mergers & Acquisitions: Mergers and acquisitions are strategic decisions taken for boosting up company’s growth by augmenting its production and marketing operations. One of the main reasons that companies opt for a merger or acquisition is that, by conjoining business undertakings, performance will increase and costs will decrease. Essentially, a business will attempt to merge with another business that has complementary #strengths and weaknesses. Many M&A deals allow the #bidder to thrash future competition and gain a larger market share in its product’s market. Mergers or amalgamations may take two forms:- #Merger through Absorption:- An absorption is a combination of two or more companies into an ‘existing company’. All companies except one lose their identity in such a merger. Example: 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist and a new firm GlaxoSmithKline was created. #Merger through Consolidation:– A consolidation is a combination of two or more companies into a ‘new company’. In this form of merger, all companies are legally dissolved and a new entity is created. Here, the acquired company transfers its assets, #liabilities and shares to the acquiring company for cash or exchange of shares. A fundamental characteristic of merger is that the acquiring company (existing or new) assumes the #ownership of other companies and combines their operations with its own operations. Reverse Merger Is a deal facilitating a private company to become a public company. The deal enables private company by listing in a short time period. Occurs when a private company has strong prospects and is eager to raise financing, buys a publicly listed shell company. Usually the public one is one with, no business and limited assets Acquisitions and Takeovers #Reverse Takeover Acquisition usually refers to purchase of smaller firm by larger firm Sometimes, smaller firm acquire #management control of a larger / longer established company Keep its name for combined entity Friendly Acquisition Companies accomodate in negotiations Identical to merger of equals Cognizant to Acquire TriZetto, creating a fully-integrated healthcare technology and operations leadership. With more than $3 billion in combined healthcare revenue, Cognizant and TriZetto will serve nearly 245,000 healthcare providers. Hostile Acquisition Takeover target reluctant to be purchased If the #acquiree company has no prior knowledge of offer Hostile takeovers do turn friendly most of the times. Offer is usually upgraded for smooth acquisitions Benefits of Mergers and Acquisitions Greater Value Generation Generate Cost Efficiency #Economies of Scale Increase in Market Share Gain higher...
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Strategic Vision for Success

Strategic Vision for Success
Strategic Vision for Success in International Market Some business firms with a modest and humble beginning make it to the top in a very short span of time. How do you think this is possible? Success does not come that easy. You have to have real focus backed up by solid strategies for such resounding success. Some people formulate strategies and follow suit, some flow along with the stream of situations and react accordingly, rather than merely plotting strategies. Mere strategizing is not enough, you have to look into the actual situation and how it would affect your operations. A strategy is a comprehensive plan of action that sets critical direction and guides the allocation of resources to achieve long-term organizational objectives. Let us have a clear understanding on the reasons for formulating a strategy: Business has gone global for many reasons, including reactive ones like, international competition, customer demands and trade barriers, and proactive ones like seeking economies of scale, new international markets, resource access and cost savings. After the liberalization, globalization and privatization processes activated in full swing, many firms have come to the limelight in the international market scenario, which has provided them with a solid head start. Companies have to respond to both changes in the external environment and emerging opportunities. An opportunity not well utilized is an opportunity lost. Rational planning is called for to meet international expansion through workable strategies. International corporate strategy is purely based on the intentions of your firm, the objectives that stem out from your vision and can be materialized by scanning the environment for threats and opportunities, assessing the internal strengths and weaknesses of the firm, considering alternative international entry strategies and firming up on the workable ones. List down the answers to the following questions and you may arrive at a reasonable conclusion on your company’s market standing.  Strengths:  What are your advantages? What is the activity that you specialize in? What is your uniqueness that differentiates you from your competitors? Your own viewpoint and that of the people you deal with is necessary. It is important to be honest and realistic. This exercise helps you and your team to understand the mission and purpose.  Weaknesses:  What is done badly? What could be done better? What should be avoided? What causes problems or complaints? To identify the unpleasant truths as quick as possible is the notion of this exercise. Ascertain Your Priorities: After ascertaining the priorities, the strategic management process is carried out with well laid plans, executed by professional strategists followed by implementation of control and evaluation procedures. Many corporate firms go for strategic alliances, that may include, acquisitions, mergers, joint ventures, strategic partnerships, cartel agreements and so on to survive in the international market as well as to exploit the opportunities available in the global market with the available potential resources put to optimal...
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Growth Strategies in Business

Growth Strategies in Business
GROWTH STRATEGIES  What are Growth Strategies : The means by which an organization plans to achieve its objective to grow in volume and turnover. The dynamic business environment calls for periodical changes in the business definitions, in terms of customer groups, customer functions and alternative technologies to broaden their scope for expansion. Udemy Marketing Strategies: Increase Enrollment – Unofficial Begin building your student base with these 6 marketing strategies to increase your ranking on Udemy. Growth can never be achieved by a business enterprise, if there is no proper planning for diversification of its business activities across a broad spectrum. Expansion strategies are followed when an organization aims at high growth, by improving its overall performance.  Expansion Strategy: Expansion strategies have a profound impact on the internal configuration as well as internal functioning of an organization. The business firms bear the risk of moving in an entirely new direction, where there is an equal chance for failure as that of success. If only a manufacturer plans to diversify or expand in a field that complements his present business activity, does it make any sense. What is the fun in venturing into a business activity about which you have no knowledge or scope? Expansion through concentration: This involves investment of resources in a product line for an identified market with the help of proven technology. A firm may attempt to intensify its focus on existing markets through market penetration strategies. Or new users may be targeted for existing products or alternatively it may introduce new products in existing markets by concentrating on product development. Concentration policy relies on the principle of “A known devil is far better than an unknown angel.” It is a very difficult task for firms to capture new markets or to gain acceptance for new products in existing markets. Expansion through integration: A company attempts to widen the scope of its business activities in such a manner that it results in serving the same set of customers. The alternative technology dimension of the business definition undergoes a radical change. Firms try to move up or down in the value chain to meet the demands of the customers by integrating adjacent activities. Expansion through co-operation: It may include mergers, takeovers, joint ventures and strategic alliances. Two firms try to combine their resources, capabilities and core competencies to pursue mutual interests to develop, manufacture or distribute goods and services. Expansion through internationalization: International strategies are formulated in the wake of globalization where most of the developing countries have liberalized their economic policies facilitating foreign direct investments, generating foreign exchange. Many multinational and transnational companies are setting up their operations in developing countries to factorise the economies of scale and to enjoy the advantages of cheap labor and availability of resources. Stability Strategy: Many firms go for stability strategies that are devoid of any risks. They are quite contented with the modest profit gained from the present business activity and try to maintain the same level of performance, until and unless there is a pressure from the market in the form of competition. Only few firms have that adventurous attitude to take risks in order to have a sustainable competitive...
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