Lenovo eyes takeover, with IBM server unit in focus
Please Write Your Response in 500 Words
For Grade 8C
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New Case Studies Discuss Question
Mergers and Acquisitions helps firms to grow their size exponentially and rise their growth prospects in the national and international markets. It provide greater market access, new technologies, capital assets and above all access to new markets.
Discuss whether firms always benefits from the mergers and acquisitions.
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February 2nd 2014
Please Write Your Response in 500 Words
Note:
1. Write with references.
2. Present market examples in support of your reasons.
3. Marks allocation for this article is 20
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks
C. Use of Key words. 5 Marks
D. Examples from various Markets 5 Marks
Merger and Acquisition usually may happens because of business want ro enlarge their market, make their company bigger so that it will be popular and will earns more profit than before or sometimes to make or produce a new product. Merger and acquisition is usually done because the company that do the merger or acquisition wants to make a new product but since they don’t want to start the business from zero again which means they don’t want to buy anymore facilities for the business so they can just do merger or acquisition of other company and able to use the facilities pf business of other company.
ReplyDeleteFirst of all we should know the meaning of each of them. The other name for acquisition is takeover. Acquisition is a company buy the whole of another company so the company that buy the other company have a rigt to coontrol and takeover all the company such as the market, the facilities and all things regarding to the company will all be the right for the company that buys that company because it just means like the buyer buy the company from the company that sells the business. For example of acquisition that now had happened is Tata chemicals buys british salts, where tata buys the british producing salts company at US $13 billion and the acquisition gives tata access to verystrong brine supplies and also access to British salt’s facilities as it produces about 800 000 tons of pure white salt every year.
While merger means 2 or more companies working together but there is not any buyer and seller ig comapnies merger because in acquisition the impact later on for the business is only for the buyer while in merger, if the business succesfull, the profit they earned will be shared among the companies. There are 3 types of merger such as vertical, horizontal, and lateral.Horizontal happens to business that merge in the same type of production which are common in industries. While vertical merger are when 2 companies or more merge together to move to thenext stage, the example is when a car company want to buy a showrooms to sell their cars, if a car company buy showrooms, it will increase the stage of the business since the company will be able to sell their cars in a showrooms and the other vertical merger is when business move backward example reliance power and reliance natural resources merger because even though reliance power don’t merge with reliance natural resources they will still can produce power while the last type of merger is lateral which means that they are at different stage of production the example is in 2008 when mars buys wrigleys mars produce chocolate bars and wrigleys produce chewing gum, the goods are similiar but they don’t compete with each other.
The goal of merger or acquisition is to earn more profit, less their expenses, make a larger market all around the world and bemore popular which actually benefit for both sides of the business. In acquiaition the buyer happy because they no need to make a facilities for the business again form the seller and the seller also happy because they got money form the buyer while in merger, the both companies are happy because by working together, they can reduce the cost, earn more profit and be more popular nationally and internationally. But there may be some problems in acquisition and merger such as for employees they may be lay offs because usually the new business will choose to have less labour to reduce the cost and usually the employees that are lay offs are not very useful or professional which make them hard to find another job. For the managers they should can cooperate with other person from other company since there will be more culture if the company are merge or acquisition because 2 companies are working together. For the shareholders of the acquired firm is very benefit because usually they can acquired another firm with a very cheap price, while the last is impact to theshareholders of the acquiring firm is the most affected because can be atributed to debt load which accompanies as acquisition.
ReplyDeleteIn conclusion, I concluded that actually merger and acqusiition is first did of course to expect a benefit in both sides for the acquired firm, the acquiring firm and also in merger for both sides of the firm, but sometimes merger and acquisition may also hav eproblems in the manager at tops that worried will cannot cooperate well with the manager in other company, employees where they are worried if they will be lay offs and the shareholders of acquired firm that qorried they will just got the bad things while the shareholders of the acquiring firms will got all the benefit from the merger and acquiring.
Resouces :
• http://trak.in/tags/business/2010/12/24/top-10-ma-mergers-acquistions-2010/
• http://finance.mapsofworld.com/merger-acquisition/impact.html
• Note Book
Well done Tiffany, examples are great. I appreciate you effort to give sources of your writing.
DeleteMergers is when 2 companies agrees to join together to form 1 big company. Aquisition is when they buy enough share of another company so they can take full control. Mergers and aquisitions are required so a company can make more profit. This will happen if they increase the profit that they make and reduce the cost they create.
ReplyDeleteThere are a lot of things that can make them do this like they want to expand their business. They will eliminate competition. When this happens they will get more market share because they get the capital the company they bought have and eliminate competition meaning they will get more profit.
But if they want to grow their firms shouldn't they just grow it internally and grow it themselves. The reason to this is that the other firm that they bought may already have the capital they need. They may not want to start from scratch and waste money again to grow a firm. Buying the firm will also save time.
There are a few types of acquisition like vertical, horizontal and lateral. Vertical is when you buy a company that produces the same type of goods and services. They want to expand their business at producing only 1 kind of goods and services.
Horizontal acquisition is when a firm buys another firm that is in the same industry but at different production stages. This means that they can reduce the cost they need to pay to get the goods and services they need. They can avoid paying the profit margin set by other companies.
Lateral acquisition is when a firm buys another company that has no relationship with the goods and services they currently produce. They buy them so they can produce different types of goods and services and sell them just incase the market for one fails.
Firms that perform acquisition or merger can benefit depending on how they do it. If they grow too much they may lack resources and outgrow the market and when this happens they will make a lost. Acquisition will be a disadvantage for the other company because they have no choice but to sell it, no control over it.
Good work Nicholas.
ReplyDeleteTest
ReplyDeleteMerger 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. These are both ways how firms grow and expand. Mergers are rare, as they happen between two companies that are equal in size and reach. Both companies lose their individual identities, and a third company is formed. For example, pharma companies Glaxo Wellcome merged with Smith Kline Beecham, and formed a third entity, Glaxo SmithKline. An acquisition, or a takeover, happens when a bigger company buys out a smaller company, with or without the smaller company’s cooperation or willingness to be acquired. The usual motivations are economies of scale, killing a competitor, gaining market share and reach.
ReplyDeleteThe operational and financial advantages of mergers and acquisitions are widely documented and may also present the face of mergers and acquisitions activity to shareholders, the public, corporate appeals to legislators, etc. These advantages can include increased market share, lower cost of production, higher competitiveness, acquired research and development know how and patents, financial leverage and perhaps improved profitability.
However, not all the mentioned advantages of mergers and acquisitions may be realized, but are often included among the reasons for engaging in the corporate activity. When a company is able to benefit from all these advantages it can lead to more stability as a corporate entity and cold also provide for higher political influence and industry leadership.
Another advantages will be explain further next, is synergy that offers a surplus power that enables enhanced performance and cost efficiency. When two or more companies get together and are supported by each other, the resulting business is sure to gain tremendous profit in terms of financial gains and work performance. When two or more companies get together and are supported by each other,the resulting business is sure to gain tremendous profit in terms of financial gains and work performance.
Cost efficiency is another beneficial aspect of merger and acquisition. This is because any kind of merfer actually improves the purchasing power as there is more negotiation with bulk orders. Apart from that staff reduction also helps a great deal in cutting cost and increasing profit margins of the company. apart from this increase in volume of production results in reduced cost of production per unit that eventually leads to raised economies of scale.
In some cases, mergers and acquisitions may not only disadvantage the shareholders but consumers as well. In both cases, this may happen when the newly formed company becomes a large oligopoly or monopoly. Moreover, when higher pricing power emerges from reduced competition, consumers may be financially disadvantaged. Some of the potential disadvantages facing consumers in regard to mergers are the increase in cost to consumers, decreased corporate performance and/or services, potentially lowered industry innovation, suppression of competing businesses, and decline in equity pricing and investment value.
Shareholders may also be disadvantaged by corporate leadership if it becomes too content or complacent with its market positioning. In other words, when merger and acquisition acitivity reduced industry competition and produces a powerful and influential corporate entity, that company may suffer from non-competitive stimulur and lowered share prices. Lower share prices and equity valuations may also arise from the merger itself being a short-term disadvantage to the company. One example of takeover is Tata Steel buying Corus or Tata Motors buying Jaguar-Land Rover, recently, Microsoft has also bought Nokia.
In conclusion, firms will not always benefit from mergers and acquisitions. There are advantages and disadvantages in each aspect of merger and acquisition.
References:
Google (Internet)
A merger occurs when one firm assumes all the assets and all the liabilities of another. The acquiring firm retains its identity, while the acquired firm ceases to exist. A majority vote of shareholders is generally required to approve a merger. A merger is just one type of acquisition. One company can acquire another in several other ways, including purchasing some or all of the company's assets or buying up its outstanding shares of stock.
ReplyDeleteIn general, mergers and other types of acquisitions are performed in the hopes of realizing an economic gain. For such a transaction to be justified, the two firms involved must be worth more together than they were apart. Some of the potential advantages of mergers and acquisitions include achieving economies of scale, combining complementary resources, garnering tax advantages, and eliminating inefficiencies. Other reasons for considering growth through acquisitions include obtaining proprietary rights to products or services, increasing market power by purchasing competitors, shoring up weaknesses in key business areas, penetrating new geographic regions, or providing managers with new opportunities for career growth and advancement. Since mergers and acquisitions are so complex, however, it can be very difficult to evaluate the transaction, define the associated costs and benefits, and handle the resulting tax and legal issues.
"In today's global business environment, companies may have to grow to survive, and one of the best ways to grow is by merging with another company or acquiring other companies," consultant Jacalyn Sherriton told Robert McGarvey in an interview for Entrepreneur. "Massive, multibillion-dollar corporations are becoming the norm, leaving an entrepreneur to wonder whether a merger ought to be in his or her plans, too," McGarvey continued.
When a small business owner chooses to merge with or sell out to another company, it is sometimes called "harvesting" the small business. In this situation, the transaction is intended to release the value locked up in the small business for the benefit of its owners and investors. The impetus for a small business owner to pursue a sale or merger may involve estate planning, a need to diversify his or her investments, an inability to finance growth independently, or a simple need for change. In addition, some small businesses find that the best way to grow and compete against larger firms is to merge with or acquire other small businesses.
In principle, the decision to merge with or acquire another firm is a capital budgeting decision much like any other. But mergers differ from ordinary investment decisions in at least five ways. First, the value of a merger may depend on such things as strategic fits that are difficult to measure. Second, the accounting, tax, and legal aspects of a merger can be complex. Third, mergers often involve issues of corporate control and are a means of replacing existing management. Fourth, mergers obviously affect the value of the firm, but they also affect the relative value of the stocks and bonds. Finally, mergers are often "unfriendly."
references: http://www.answers.com/topic/mergers-and-acquisitions#ixzz2s2rK90TB
Entrepreneurs often want their firms to grow in size and increase the volume and value of their outputs. Producing more output means increasing the scale of production in a firm. There are two main ways a firm can grow in size and expand its scale of production. Internal growth or organic growth involves a firm expanding its scale of production through the purchase of additional equipment, increasing the size of its premises and hiring more if needed. This will increase its fixed cost. To finance this growth the owners will need to use the profits of the firm, borrow money from banks and other lenders or sale shares in the ownership of the business to other investors. External growth in the size of firm is more common. It involves one or more firms joining together to form a larger enterprise. This is known as integration through merger or takeover. A merger occurs when the owners of one or more firms agree to join together to form a new, larger enterprise. A takeover or aquisition occurs when one company buys enough shares in the ownership of another so it can take over all control. This may happen with or without the agreement of the owners of other company.
ReplyDeleteThere are three main types of integration between firms. Horizontal integration involves a merger or takeover of firms engage in the production of the same type of good or service. Most integration between firms is horizontal integration. For example, in 2007 India's Tata Steel won a $12b takeover battle for UK based steel maker Corus. The aquisition immediately made Tata the fifth biggest steelmaker in the world and allowed the company to cut its costs by $350m a year, then another example, Exxon Mobil was formed in 1999 following an agreement by US companies Exxon and Mobil to merge their operations. The combined company is now one of the largest in the world and benefits from a large market share and significant economies of scale in gas and oil exploration, production and sales. This type of integration may provide a number of economies of scale, for example the employment of more specialized machines and labour, the spreading of administration cost and bulk buying. Vertical integration occurs between firms at different stages of production. For example a car manufacturer may combine with a chain of car retailers. This involves forward integration. In this way the car manufacturer can be certain it has showrooms at which it can promote and sell its cars. For example, Toyota in Indonesia has 5 main dealers to supply Toyota cars to dealers all over Indonesia, then another example, Cimory opens a restaurants and shops to sell their products. Backward integration can also occur between firms. For example, a chese maker may combine with a dairy farm so that it is guaranteed supplies of milk. For example, the Reliance Group is India's largest private sector enterprise. It began as a small textile maker in the 1960s using imported polyester to make a range of garments under the brand name 'Vimal' which is now a household name In India. It soon began to manufacture its own polyester yarn and fibres and is now the world's largest producer of this sinthetic materials. It went on to develop and merge with businesses involved in oil and gas eploration, petroleum refining, petrochemicals and also retail stores. In this way the business succsessfully controls its supply chain from the production of natural oils and gases which are used in the manufacture of petrochemicals needed to make polyester fibres for textile production, and retail outlets that sell its brand of clothing. The business has a saying:'Growth is live'. Another example, in 1989 the merger among Toyota Astra Motor (Toyota car importer and exporter), Multi Astra (Toyota car assembly manufacturer), Toyota Mobilindo (Toyota car body components) and Toyota Engine Indonesia (Toyota car engine manufacturer) occured to reach optimum work and efficiency and be under one command.Through this growth in size the Reliance Group, like many other large firms, is able to enjoy a number of cost advantages over smaller firms. When a firm expands the scale of production it has a chance to become more efficient and lower its average cost of production. Lateral integration occurs between firms in different industries in the same stages or different stages of production. Lateral integration is also called conglomerate merger and forms firms called conglomerates because they produce a wide range of different products. For example, Samsung is a major global business group well known for its televisions, mobile phones and other electronic products, but it also has business interests in shipbuilding, construction, chemicals, financial services and entertainment. However, a firm producing a wide range of goods and services reduces the risk of falling consumer demand for any one of its products having a major impact on its business.
ReplyDeleteIn conclusion, by doing merger or acquisition firms will become larger. Large firms have benefits of purchasing economies (price discount for bulk purchases), marketing economies (hiring their own vehicles), financial economies (borrowing money at lower interest rate), Technical economies (having the capital to invest in specialized machinery and equipment) and risk bearing economies (producing a varied range of products and expanding into different consumer market to reduce risk).
ReplyDeleteResoures:
http://www.toyota.co.id/corporate-information/profile/#
Complete Economics for Cambridge IGCSE and O level (Oxford) book
Notebook
Merger is when two firms together form a new company. After the merger, the separately owned companies become jointly owned and obtain a new single identity. When two firms merge, stocks of both are surrendered and new stocks in the name of new company are issued. Generally, mergers take place between two companies of more or less same size.
ReplyDeleteHowever, with acquisition, one firm takes over another and establishes its power as the single owner. Generally, the firm which takes over is the bigger and stronger one. The relatively less powerful, smaller firm loses its existence, and the firm taking over, runs the whole business with its own identity. Unlike the merger, stocks of the acquired firm are not surrendered, but bought by the public prior to the acquisition, and continue to be traded in the stock market.
Mergers appear in three forms, based on the competitive relationships between the merging parties. In a horizontal merger, one firm acquires another firm that produces and sells an identical or similar product in the same geographic area and thereby eliminates competition between the two firms. In a Vertical Merger, one firm acquires either a customer or a supplier. Conglomerate mergers encompass all other acquisitions, including pure conglomerate transactions where the merging parties have no evident relationship (e.g., when a shoe producer buys an appliance manufacturer), geographic extension mergers, where the buyer makes the same product as the target firm but does so in a different geographic market (e.g., when a baker in Chicago buys a bakery in Miami), and product-extension mergers, where a firm that produces one product buys a firm that makes a different product that requires the application of similar manufacturing or marketing techniques (e.g., when a producer of household detergents buys a producer of liquid bleach).
In mergers and acquisition. Some reasons to merge or takeover companies may bring benefits or disadvantages. An example is for expansion. Expansion can increase revenue. With larger amount of revenue, the company will be able to produce more or buy better quality machines. An example is the merger of Continental Airlines and United Airlines to create United-Continental which is predicted to bring savings to the companies of $1 billion and will create a company with a combined revenue of $29 billion.
Another reason to merge is for knowledge acquisition. Business owners who merge often share knowledge and expertise that can benefit both businesses. An example is that some car companies merge with other car companies to obtain the idea of the car's design or the engine of the car. An example is the merge of Renault and Nissan. Another reason to merge is by cause of under-performance. Businesses that are having difficulty finding customers for their products can merge with a better performing niche, allowing the underperforming business to expand along with it and find new markets.
Another reason to merge is by cause of overhead. Sharing marketing costs can reduce overhead. Both businesses can be advertised within a single ad instead of having two separate ads for two different products. Reducing cost is one major factor for merger or acquisition. Costs can further be reduced by having merged businesses share production facilities. Reducing costs is one way to increase profit.
My conclusion is that mergers and acquisitions will mostly bring advantages rather than disadvantages.
References: Economics Textbook and Internet
Kevin 8C
Merger can be simply be defined as an action of two companies who agree to work together. This normally happens when an owner desperately wants to increase it’s firm size. For example, business A and business B concede to work together. One of the advantages of doing merger is that you can easily increase the size of your firm without having to find more employees, equipment, capital and other facilities.
ReplyDeleteOn the other hand, acquisition is the complete opposite of merger. It is described of when a company takes over another company. For example, Company A is a big company, while company B is not as big as company A. And so, company A takes over company B. One of the advantages is not only will your profit, revenue, gross income and etc will increase but your equipment, capital, and number of employees will as well. Which in result, would help you become a bigger and probably, well-known, company.
There are a few types of acquisition. One of them is, horizontal acquition. Horizontal acquisition is when the company takes over another company that is producing the same goods. For example, Alfamart is taking over Indomaret. Last but not least, vertical acquisition. Vertical acquisition is almost the same with horizontal acquisition but with companies that is producing different goods. For example, a toy company that is very wealthy took over a plastic,steel, or whatsoever company. Why? So that they can get the resources that they need in order to produce the products.
Some business owners may decide to do acquisition or merger. This is because it will help their business to increase their size, which will later on help to increase their market share, profit, number of employees, capital employed and so much more. Also, in the process of merger, when two companies join together it is sharpened. Because as they always say, “Two brains are better than one.”. Having two business owners join together would help their company and personal life.
Doing merger and acquisitions can also motivate workers or business owners to do better in their business. It has been proved that doing merger or acquisition would lead to firms to better facilities and improved financial performance. What i meant by improved financial performance is to have a better result, achievement, act, demonstration and etc. For example, having exceptional economic of scale, revenue, market share, profit and so much more. These factors usually motivate business owners when they are devastated and confused how to increase their size or what to do with their business. Some little things can motivate people.
Overall, merger and acquisition is an action that business owners do to develop their business into a magnificent one. There are some disadvantages that may come along the way, but in the end it will be worth it.
RESOURCES: Google
Merger is when two companies that agree to combine together and form a brand new company, when this happen the assets and liabilities from both company are combined or shared together. There are 3 types of merger : horizontal, vertical, and lateral. If horizontal is when the two companies are on the same stage. If vertical is when the two companies are on different stage of production ,because the smaller company is a specialized company thatbis used by the bigger company so the bigger company can reduce the cost and get more profit. There are two types of vertical merge, the first is forward and the second one is backward. If forward vertical is when the bigger company bought another company for the next stage. If backward merge is when a company bought another company for the stage before. If lateral is when two companies are on different type of production.For EXAMPLE for horizontal: CIMB bank with niaga bank, coca cola with fanta, ferrari with lamborghini, etc. the example for forward vertical is ford bought showrooms or transporting company, etc.The example for backward vertical is ford with goodyear, samsung with android, apple with software maker, etc. If lateral: ford with pizza hut, coca cola with nike, book company with candy company, etc. The other name for aquisition is takeover, takeover can be done by a company buy more than fifty percent of the other company's shares, So the whole desicion is taken by you. There are types of takeover: hostile take over, reverse take over, backflip take over, etc. If hostile take over allows a suitor to take over a targeted company that whose managementunwilling to agree. If reverse take over is a type of take over where a private company aqcuires a public company. If backflip take over is any sort of take over in which the acquiring company turns itself into subsidiary of the purchased company. For example: microsoft buying nokia, ebay bought braintree, kraft food bought cadbury, etc. Both of the way (merger and acquisition) is use by companies to grow and increase the size of the firm, by using merger or acquisition, the company can get more profit and even they can reduce the cost, the other advantages are the numbers of employees increase, the market share increase, the capital increase, etc. Resources: corner note book, wikipedia, and
ReplyDeleteBased from Wikipedia Merger and Acquisitions is 2 different things and sometimes they are mistaken in definition,and based on wikipedia merger means : a legal consolidation of two companies into one entity meaning that both sides agreed to combine under one name by working together such as Daimler-Benz mergered with Chrysler and a new stock company is made named DaimlerChrysler. On the other hand acquisition means that one of the company takes over the other company completely and established itself as the new owner such as ATI graphics card company being bought by AMD in a $5.4bn acquisition in 2006 and then AMD establishes itself as a new name named AMD ATI Radeon Graphics company and now it has become the company's Graphic Card Producer For Its Latest APU Proccesor (Accelerated Proccesing Unit) and Desktop Gpu .
ReplyDeleteMergering&Acuisition also Means that the company can have a new line of products without costing both company any money in merger but for acquisition one of the company have to buy the other company to gain their production line such as the example of Microsoft buying Nokia's cellphone production togain their production line rather than making their own phone production line which will take a lot of time as long as 5 years so to save time and cost they just bought another company that have already made succesfull cellphone and in this case it's Microsoft buying Nokia Cellphone Production to create their own Nokia Windows Phone this means that the company do a Vertical Acquisition this is called vertical because Microsoft who
Produces only Software such as Operating system and Office & Presentation tool bought a company that produce a completely different object or things
Just like From The other Example Such as ATI&AMD Acquisition this is also another vertical acquisition Because ATI produces Graphic and Video Cards For Laptops and Desktops Whereas the AMD Company Focuses on Making Proccesors not Graphic Cards and with that AMD was able to Produce Their Own ( GPU/CPU ) APU Proccesor which was a Great Success for AMD and The Buyout Made by AMD in buying ATI had given so much profit for AMD
ReplyDeleteSOURCES: Class Explenation,AnandTech.com,Wikipedia,News Article at bipinkala.blogspot.com
A firm will always try to increase in size, in order to gain more profit, to be well-known, and to increase their market shares. There are two types of growth in a firm: Internal Growth and External Growth. Mergers and acquisitions are both an example of external growth. Merger is defined as the combining of two or more firms to join as one entity. One famous and one of the most successful results of merging is Exxon and Mobil, forming Exxon Mobil, now one of the world’s most leading company in oil production. An acquisition or takeover is the purchase of one company by which establishes itself as a new owner. The purchase may be of full, or nearly nearly full, of the assets or ownership equity. In 2013, Microsoft acquires Nokia with a value of $7.2 billion.
ReplyDeleteThe idea of merging and acquiring a company is due to many valid reasons, rather than just the idea of growing their business. Companies merge and acquire due to synergy, the idea that by combining both companies, performance will increase and total costs will decrease. Businesses will want to merge with another business that has defined strengths and weaknesses. Merging companies may merge to eliminate the competition that they are unwilling to face. With lesser competition, hence the company can gain a larger market share in the market.
Merging two companies, especially with those of different business production, can expand the company’s diversification that leads to a sharpened focus on getting more consumers. A company that merges to diversify can acquire another company in a different industry or production in order to reduce the impact of a particular industry's performance on there profit. Companies tend to merge with other companies that have deep market penetrations in the key area of operations.
The merger of the companies Exxon and Mobil is a huge success. One of the major driving forces behind the recent mergers in the company is the falling price of crude oil--a product of oversupplyin the market and stagnant demand, thats result's in particular from the deepening economic slump in Asia and the contraction of world growth. The coming together of Exxon and Mobil will forge a corporation of enormous size. Its revenue will succeed far more than the gross domestic product of all but 23 countries. It will be the world's largest retailer of gasoline, with around 47,500 stations worldwide and an estimated annual profit of nearly $12 billion.
However, there are disadvantages to merging and acquisitions. A company must have enough resources when they wanted to take over, or merge. Many companies that attempt to do M&A fail to do so, causing bankruptcy and making loss both in assets and capital. A company may also fail because of lack of consumers and a loss in competition with other companies. Failed examples of M&A is Daimler Benz and Chrysler, both which produces and manufacture cars. In 1998, Mercedes-Benz manufacturer Daimler Benz merged with U.S. auto maker Chrysler to create Daimler Chrysler for $37 billion. The logic didn't made sense: create a trans-Atlantic car-making powerhouse that would rule the markets. But by 2007, Daimler Benz sold Chrysler to the Cerberus Capital Management firm, which specializes in restructuring troubled companies, for a mere $7 billion. This was sought because Chrysler was not fit enough near the league of Daimler Benz, and many felt that Daimler came in and tried to tell the Chrysler side how things are done. Such clashes always work to undermine the new alliance; combine that with poor sales and a recession, and you have established corporate divorce.
ReplyDeleteSo, as conclusion, growing externally by merger and acquisition can bring more advantages than disadvantages. It all really depends on the company on deciding their aim to merge/acquire and if they have enough assets to be willing to grow their company and increase profit and sales, and how they do it.
Sources:
http://www.investopedia.com/ask/answers/06/mareasons.asp
http://www.wsws.org/en/articles/1998/12/merg-d15.html
http://en.wikipedia.org/wiki/Mergers_and_acquisitions
http://www.rasmussen.edu/degrees/business/blog/best-and-worst-corporate-mergers/
Both merger and acquisition are types of external growth. Merger is the combination between two or more companies. A new company will be formed in the process of merger. For example, in 1999, JDS Uniphase company is formed from the merger of JDS Fintel Inc. and Uniohase Corp. On the other side, acquisition, also known as takeover happens when one company buys shares in the ownership of another company so that it can take overall control. In acquisition, no new company will be formed. Acquisition may happen with or without the agreement from the other company. For example, Manulife Financial Corporation's 2004 acquisition of John Hancook Financial Servoces Inc.
ReplyDeleteThere are many benefits that may be obtained from merger and acquisition. Both may help the company by getting more skilled employees, better informations, knowledge or other business intelligence. For example, a business that is well prepared, having good systems, and proper management will be beneficial for the other company that is willing to buy and wanting to improve their business.
Another good reason for company to expand externally is so that they could have a wider customer base, which means they could attract more customers and may have many customers. Expanding may also help as it may increase the business's market shares, as the target business may have bigger and many distribution channels and systems that may help the companies to improve themselves. Merger and acquisition also helps to reduce the competition between businesses in the market.
When two or more companies that are combined become together, the new company formed will have more supports as two companies are supporting it. Greater support may affect the result of the business. The output of the business will surely be better in terms of quality or price that may help the company to increase their revenues and also gain greater profits that before. Merger and acquisition also helps companies that are under performing. They could make their business to become better if another company would be willing to merge or doing acquisition with the company.
However, merger and acquisition aren't always beneficial for both side of the company. The disadvantage that may occur is disagreement. Too much people may lead to disagreement. Disagreement may lead to slower decisions making, which may lead the company to have a slow output production. Disagreement between employees and managers may result the employees and managers to have drop in motivation to work. A loss in motivation of work in employees may result the productivity to be low, which may results to lower revenues and profits.
As a result of acquisition, employees from the weaker side of the merge need to work hard to adapt to the working environment, and also re-skulking on their skills. They need to adapt fast, so that they could produce the output well, by having more training.
As the conclusion, firms do not always benefit from mergers and acquisitions. There are advantages that the company may receive, but there are also risk that the company should face when they wanted to expand their compony externally.
References:
1. www.investopedia.com/terms/m/mergersandacquisitions.asp
2. www.mbda.gov/node/1394
3. Economics textbook and notebook
What is a merger and an acquisition? Merger is a process where two or more companies join together, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. This means that two or more business join together to make a more powerful business. While mergers join with another company, acquisitions takes over a company. Business acquisition is the process of acquiring a company to build on strengths or weaknesses of the acquiring company. The result is that the business will grow in a quicker and more profitable manner. Take an example from Microsoft and Nokia. Microsoft purchased Nokia because Microsoft want to cover their weaknesses in the hardware part, namely the mobile phone market. After this take over, in the future, we might be encountering a new series of “Microsoft Phones”. Another example is the potential take over of Vodafone by AT&T. AT&T wants to take over the European Mobile Carrier Vodafone because AT&T wants to streghten their quality of service for mobile networks.In the news about Lenovo and IBM, Lenovo said that they are negotiating with IBM for a potential acquisition. Lenovo said to their shareholders that they are in preliminary negotiations with a third party connection in a potential takeover, but there has been n agreement. They also said that The board will make further announcement as and when necessary in compliance with the listing rules and applicable laws when a legally binding agreement is signed or there is substantial development. While until now Lenovo offered no details, media reports say that the company is still negotiating for a take over. From the article in Yahoo.com about “Lenovo eyes takeover, with IBM server unit in focus”. It tells about that Lenovo is planning to take over IBM to further streghten their part in computers, especially in the server unit. This type of aquisition is horizontally, meaning that they plan to take over another business which Is in a same production level, and the same production items, which are server computers, Laptops, and desktops.
ReplyDeleteReferences\Sources:
http://www.bloomberg.com/news/2013-10-31/at-t-is-said-to-explore-vodafone-takeover-as-soon-as-next-year.html
http://au.finance.yahoo.com/news/lenovo-eyes-takeover-ibm-server-075149273.html
http://www.investopedia.com/terms/m/merger.asp
http://en.wikipedia.org/wiki/Business_acquisition
http://www.bloomberg.com/news/2013-11-21/microsoft-to-take-over-nokia-s-landmark-headquarters.html
Notebook
Economics Textbook
Matthew Jonathan
8C
Matthew Jonathan jelek! muahahahahahahaha
DeleteMerger is the voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration. While acquisitions are taking control of a firm by purchasing 51 percent (or more) of its voting shares. There are some types of merger integration: A. Horizontal, B. Vertical, and C. Lateral. Horizontal means mergers in the same stage of production, vertical is in the different stage of production while lateral is in a whole different market. Examples of a vertical integration is the chocolate maker takes over a cocoa plantation, it is a backward vertical integration because it is in a different stage of production. Why it is called backward because a cocoa plantation is the stage before the chocolate maker. The vertical backward integration also happens if a clothing retailer merges with the clothes manufacturer. Another example is a travel insurer who merges with an online holiday company. This type on integration is the vertical forward integration because travel insurer is still in the same market with online holiday company and the online holiday company is the next stage of the holiday insurer if they want to succeed.
ReplyDeleteAnother example of the vertical forward integration is an aircraft maker merges with an aero-engine company. Some examples for the horizontal integration is if Nike merges with Adidas, Mango merges with Zara, Louis Vuitton merges with Bottega Veneta. I also have some examples for the lateral integration: A shoe retailer merges with a clothing retailer, An investment bank takes over an electronic producer. Some examples of take over or acquisitions are the Microsoft who buys Nokia company for 7.2 billion US dollars. The main reason why Microsoft wants to take over Nokia because Microsoft can only produce the software but not the hardware while Nokia can make the hardware but not the software. Beside that reason, there is another people said that Microsoft wants to buy Nokia because Nokia has fallen behind rivals Samsung and Apple, while critics say Microsoft has been slow into the mobile market.
References/ Sources:
http://www.businessdictionary.com/definition/merger.html
http://www.businessdictionary.com/definition/acquisition.html
http://www.bbc.co.uk/news/business-23940171
Economics Book
Corner Notebook
Google
ReplyDeleteMerger refers to the process of combination of two companies, whereby a new company is formed. An acquisition refers to the process whereby a company simply purchases another company. In this case there is no new company being formed. Benefits of mergers and acquisitions are quite a handful.
Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of economies of scale. It may also lead to tax gains and can even lead to a revenue enhancement through market share gain.
Mergers can be useful when a business firm wishes to make its presence felt in a new market, when a business organization wants to avail some administrative benefits and when a business firm is in the process of introduction of new products. New products are developed by the R&D wing of a company.
Besides, Reference for Business lists three basic categories of tax-free mergers as type A, type B and type C reorganizations. In these reorganizations a company may use a combination of voting stock and non-voting or common stock, along with cash assets, toward the company's total presented value for the acquiring company's consideration. Type B reorganizations require the target firm to figure 80 percent or more of its voting stock into the total valuation, while type A reorganizations allow a mix of stock with up to 60 percent cash, securities or debt, according to Financier Worldwide. A type C reorganization calls for the acquiring company to buy the target company at 80 percent of the company's fair market value.
Yet, there are still disadvantages of merging companies. When two firms merge, it is more than a coming together of two names or brands -- it is a real merger of people who bring along a specific corporate culture. If two firms have very different corporate cultures, conflicts can arise. For example, if an innovative, entrepreneurial company with a flat hierarchy were to merge with a highly hierarchical, conservative and traditional organization, the employees in the new organization would be likely to have difficulties working together.
In some cases there are still diseconomies of scale. Larger organizations are typically able to produce goods and services more efficiently and at a lower per-unit cost than smaller businesses because fixed costs are spread out over a larger number of units. This is not always the case, however. Sometimes when two firms merge, being larger will actually create dis-economies of scale, where per unit production costs increase because of increased coordination costs.
Its okay to merge companies, benefit(s) of having profit are still available. But, companies should also think of the disadvantages for their own company(s).
references:
http://www.ehow.com/info_8199594_disadvantages-merging-companies.html#ixzz2sKBYSqVg
http://www.economywatch.com/mergers-acquisitions/benefits.html
A merger is when one or more companies join together to become one. Generally, a merger is formed to make firms into a new, larger enterprise. From my research, the example would be the merger between HP and Compact. HP is a printer company and Compact is a PC and laptop company. As both merge into one, they may expect a stronger PC division, having to put their PC, laptop and printer on the market.
ReplyDeleteAn acquisition or takeover is when one company or firm buys out another company or its business. From my research, the example would be the acquisition of Motorola Mobility by Google. Google agreed to acquire Motorola Mobility as them together will increase innovation and choice in mobile computing. Also, Motorola patent’s portfolio will help secure the Android software operating system.
A merger or acquisition of companies strengthens its business by upgrading market reach. Just like HP and Compact, they expected to become a stronger PC company as they merge together.
Firms could benefit from the reduction of costs. An example could be the acquisition of Motorola to Lenovo. Google agreed to acquire Motorola as the buy out of Motorola costs $2.91 billion while Google bought Motorola for $13 billion. Thus, its cost reduces.
An acquisition deal may increase the market power of the company. For example, Lenovo bought out IBM’s business. Lenovo is big and popular in China, but not so well known worldwide. When Lenovo bought IBM, they became big overnight as IBM is such a big name for PCs and laptops.
Merger and acquisitions may not work all the time as the business environment changes. Just like now, everyone is so interested in mobile computing. As most people want mobile gadgets, they would prefer to iPhone or Samsung than laptops or others. An example would be the acquisition of Motorola by Google. Google is strong in it Android software operating system. Google needed to have hardware as the market was so in for it. The buy out of Motorola is expected to increase the market reach. But it may not work as other companies keep on inventing new devices and people’s taste and preference changes all the time.
Firms may not benefit as in the market itself, is very competitive, especially for PC and laptop firms. Companies that produces PC and laptops have to keep producing new products every 2 months or so, or their sales in the market might fall.
Just like HP and Compact, merger is not always good or beneficial. If I’m not mistaken, I heard that HP had to write off $25 billion after merging with Compact.
Thus, Merger and Acquisition has its pros and cons.
Reference
http://www.investopedia.com/terms/m/merger.asp
http://www.google.com/press/motorola/
http://googleblog.blogspot.com/2014/01/lenovo-to-acquire-motorola-mobility.html
http://www.mergersandacquisitions.in/benefits-of-merger-and-acquisition.htm
Monique 8C