Quiz 5: Forms of Ownership
The company is known for its active acquisitions programs. The company acquires as many as ten companies a year with a success rate of two third. In the process of selecting potential acquisition, the company puts special emphasis on vision, culture and location of potential acquisition targets. There are various reasons of having a special emphasis on location of the potential targets, as follows: 1. Better control: Proximity of location makes it easy for the acquirer to exercise control over the acquired company. For example in case of a conflict, management can easily reach and take decision to eliminate the conflict. 2. Lower travelling : Proximity of locations reduces travelling of executives during transition period from headquarters to the acquired company. It saves money as well as time, which otherwise wasted in travelling. 3. Easy transition : Proximity of companies ensures that the cultural and managerial transition will take place smoothly. Companies located in same geographic regions often carry same culture and do not face much cultural conflict. For example, a company located in the Middle East will face much problem in transition, if acquired by an American firm. These advantages of proximate locations encourage the company to consider location as one of the main factors in deciding companies to acquire.
The company is known for its active acquisitions programs. The company acquires as many as ten companies a year with a success rate of two third. In the process of selecting potential acquisition, the company puts special emphasis on vision, culture, talent pool, strategic similarity, location and customer relationship management capability of potential acquisition targets. When a company acquires another company against the wish of the company's management, it is said to be a hostile acquisition. The company is in an information technology based business. In this type of business, employees remain main assets of companies. They create and design products and maintain customer relationships that take companies to new heights. Hostile takeovers often lead to transition of the talent pool. The talented employees and management often resign and join either other companies or start new business. This transition results in loss of tallest as well as technical knowhow. Thus, a company acquired using hostile acquisition loses its strategic capabilities and potential to grow. Thus, one can say that the hostile acquisition is not a suitable move for the company.
Mergers and acquisitions generally help companies in reducing the costs by eliminating redundancies and enhancing the buying power. Besides that, it helps merged companies to increase their revenues by cross-selling goods and services to each other's customers. A company joining hands with another compan y or a company acquiring another company can be a both risky and a profitable affair. It basically depends on either company's needs, demands and resources. Some of the benefits of mergers are listed below : • A company who intends to grow business through merger obtains good quality staff and additional skills of human intelligence. A company who has a better knowledge on company and market trends would provide useful suggestions to another company in improving their businesses. • The optimum production or distributive services are always considered to be prospective with purchase rather than building new. The core concept that is required to be identified in the merging company is potential resources, which are not fully utilized and ability to obtain marginal profits • Two companies who are merging together can diversify their products, services and long-term prospects of their business. A target business can help other company in offering products or services that can be sold through their own distribution channels. These are some of the highlighting points that can be pitched by Ms. R, Company S executive, in convincing a small software company to join company C.