About Us|Contact Us|Register|Login

[google-translator]

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...
read more

Top Five Reasons Why Strategic Plans Fail

Top Five Reasons Why Strategic Plans Fail
Why Strategic Plans Fail What are Strategic Action Plans? Action plans refer to definite actions that are related to either short- or longer-term strategic goals. Action plans should include details of resource commitments, allocation and time horizons for accomplishment. Action plan development represents the key stage in planning that facilitates effective communication of plans throughout the organization followed by resource planning and deployment. Action plans are also referred to as projects, strategies, tactics, or initiatives. Plans in paper may look more creative and feasible in nature; in reality it is a big quest unanswered. Are executives showing the same kind of enthusiasm in giving shape to the plans they charted out in paper? Most plans fail or do not give the expected optimum results and the reasons attributed may be listed out as follows: 1. Authority is delegated but Responsibility is forgotten: #Senior management executives are the STRATEGIC DECISION-BRAHMAS obviously but do they demonstrate what needs to be done? Demonstration is one of the powerful forms of communication and if the strategies are only to be communicated down the line and not to be followed by the senior officials how do you expect your team to perform efficiently? 2. Confusion between #strategy and Ideas: An idea is a conceptual construct about a particular thing. It is more abstract in nature. But when it comes to strategy, you need to have a solid FUTURISTIC action plan that is bound to give you the desired results in the long term. The elements essential for a good action plan are Availability of Resources (Men, Material and Money) Efficient #Resource Allocation to the various Strategic Business Units Proper Deployment Regular Follow-up until #accomplishment of goals Minor Modification of plans in accordance with the macro environment (legal, economic, financial etc.,) 3. Dis-Orientation of Senior Leaders: If a senior leader reaches that higher position through internal promotion, he loses touch with day-to-day activities though he has a strong contextual understanding of the business. If a senior #management leader happens to reach the top through external recruitment, it takes time for him to understand the business and the nature and needs of the organization. Only few leaders are capable of devising action plans that exactly nails the problem-situation (as we all know when an organization is looking for a turn around, the first blow is to the CEO of the organization). 4. Laissez Faire attitude doesn’t work out for strategic action plans: A senior leader has to monitor an action plan from the start till the end until the expected result is achieved. No strategy succeeds without a visionary in the background. The passion that a leader exudes is overwhelmingly infectious and motivates the team to complete a project. Here the leader is the initiator who is involved throughout strategic planning process so that momentum is sustained during the critical transition from planning to action. Follow ManagementGuru Net’s board Strategic Management – The Inevitable on Pinterest. 5. There might be one good goal but definitely no one good strategy: Understand strategies are subjected to change in accordance with the internal and external environment. Say, you have invested quite a good amount of money in shares of a particular reputed company and you come to know that there is a senior level management leadership change and feelers are that prices are likely to crash. What will you do?  Just being able to conceive bold new strategies is not enough. The management must also be able to translate its strategic vision into concrete steps that is “getting things...
read more