Growing for Broke

According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:

In this chapter, we first provide coverage of expansion through corporate takeovers and an overview of the consolidation process. Then we present the acquisition method of accounting for business combinations followed by limited coverage of the purchase method and pooling of interests provided in a separate sections.

Major companies and corporations that comprise a big part of the United States economy take advantage of certain opportunities such as going public through IPO’s, acquisitions, and mergers. These three approaches provide an additional resource and many times an advantage to expand, become more profitable, or simply save a company’s existence.

A. Executive Summary: Paragon Tools is having a difficult time deciding if the company should acquire MonitoRobotics or completely remove the service area from the company. The company was facing foreign competition. So they decided to launch a number of different initiatives that were designed to spur revenue growth, which gave aggressive pricing and sales to increase with more share in the core market. Those tactics drove out most of the new foreign markets. The decision of acquiring MonitoRobotics was in between half from favoring and half declining. The reason was the amount of funds it will take to overhaul the culture and capabilities. Potential seems promising with huge

It's much more expensive to merge organizations than people realize, said Michael Goldstein, a former investment banker and finance professor at Babson College in Wellesley, Mass. Even companies in the same industry are often tripped up by costly distractions, as people worry about jobs and units fight over different ways of operating Pick (2003). Goldstein says “All that just makes people less efficient and in order to avoid such issues, merging organizations need to better communicate goals and plans to employees and other stakeholders, said Campbell Harvey, a finance professor with Duke University's business school”. “Mergers shouldn't happen too fast, especially at colleges and universities, which have a slower pace than businesses, he added. Pick (2003) says “The one toxic thing in mergers is a clash of cultures. The director of the Center for College Affordability and Productivity, wonders whether mergers are even a very useful tool in the academic world”. Another contrast to Ole-Jacobs is that advocates advocate of mergers mention many additional reasons behind the mergers such cost-saving approaches, such as online classes, more intensive use of campus availability and faculty, and trimming of athletic programs. One of the underlying reasons businesses merge is economics. Another contrast with the Ole-Jacob study involves "economies of scale," or capturing more sales and profits by combining two businesses and

He had great plans for the company and wanted to turn it into a global giant. He applied his skills, and after some few years, the company had increased its capacity. Within five years in the industry, the company’s sales expanded from 3000 units to 12,000 freight cars by 1999. They also raised employees from only 600 to over 3,000 and the figure keeps on expanding. He aims at nothing else but just success. The company under his leadership have received so many performance-related awards, and its success stories have been awesome. Success has been witnessed, and they are still

Considering the situation that Paragon Tool is currently in, with uncertainty regarding company’s future, management in disagreement and the lack of tangible information regarding MonitoRobotic’s acquisition it is recommended that Paragon Tool, take a week, gather all of senior management and develop a concrete and agreed upon strategy regarding Paragon Tool’s future growth strategy. Once such a strategy is formulated, if the service business and MonitoRobotic’s fit with these plans, then Nickolas should take the next step in conducting the necessary due diligence to determine that the MonitoRobotic acquisition price and it’s culture will fit with Paragon Tools.

Theoretically it is assumed that mergers improve the performance of the acquiring firm due to

The goals of mergers range from reducing the number of competitors, to access of new products (Belcourt et al., p 330). Statistics show that 80% of new product developments fail (Howells, 2011), partly due to challenges and conflicts with human resources functions. Mergers and acquisitions are the fastest way to enter new markets. “It is estimated that 1/3 of all mergers fail due to faulty integration of diverse operations and cultures,” (Chhinzer, 2013). Therefore, the success of a merger or acquisition lies in the ability to guide, motivate, retain, and effectively use

For story 1, I have discussed two businesses which are Argos and Sainsbury’s who are undergoing an acquisition. Despite having a downturn in Sainsbury’s profits, they are still optimistic about this takeover. Reasoning behind such business deal, is to change their consumer habits, and help their purchasing process to be further accessible through help of technology. The economical approach suited for this case, is that Sainsbury has attempted to use external expansion, to grow their business further and monopolise their

According to experts, IT is labeled as the “root cause” for many merger failures due to lack of integration, failure of due diligence and the inability to facilitate synergies (“IT M&A”, n.d.). With eighty

During the late 1950s and early 1960s, several large corporations began acquiring other companies to diversify their operations. Diversification allowed them to offset their losses in a failing industry with profits from other unrelated, successful industries. Such phenomena caused

The reduction of overhead cost by combining operations of the two companies as a single corporate entity could lead to significant cost saving, an increase in profit or revenue per employee (Buckley and Casson, 1996). For example, by the elimination of duplicate resources/branch such as IT facility and integration of some of its stores into Sainsbury outlets. Argos can meet its goal to improve Universal appeal while providing for a lean cost base. The acquisition could lead to faster growth, due to the possibility of broader market network integration (Bodislav and Iovitu, 2014). This may include the ability of Argos customers to benefit from Sainsbury’s food stores at a discounted price and collection of orders made at Argos stores at local Sainsbury stores. Thus, bringing Argos stores into Sainsbury stores will accelerate its strategy for achieving a larger product range, choices, and faster service delivery. In this regard, the acquisition deal is positive as the parent deal shares similar values ‘whenever, wherever they want to shop’. However, such integration resulting from the acquisition could also affect the efficiency of business operation due to differences in organisational structure and culture (Bodislav and Iovitu, 2014). Restructuring can be very expensive, time-consuming, and quite often creates new organisational problems because it takes time for

As manager of Stanley Black & Decker estimated, it was expected to save $350 million annually over three years if those above synergy would actually work in practice. The company can get cost saving in distribution network consolidation, materials spending, transportation cost and management. These, of course, were no sure thing; achieving them depended entirely on management making them happen. The manager might face the lots of cost synergies risk in operation after merger. First of all, because of different manufacturing modal and distribution channel, the cost of consolidation in reality may be cost much than estimate or the consolidation consequence is not very perfect due to both original companies had already established a maturity product line in long history. Secondly, although the merger would bring huge economic scale advantage and marketing gains to new combined firm, the Stanley Black & Decker has to face other fierce competitions in this industries and even the alliance of other competition in term of purchasing materials and sales in order to against the merger of Stanley Works and Black & Decker. What’s more, as we can see in the Exhibit 1, the business and regional consolidation

Mergers and acquisitions have developed to be a widespread occurrence in modern era. A merger of the size like Adidas-Armani has repercussion for the labor force of these companies transversely to the world. Although the integration of units gives an immense arrangement of significance to monetary issues and the effects, there are still some issues are the most commonly ignored ones such as human resources, financial management, marketing, sales etc.. Ironically studies confirm that the majority of the mergers not succeed to convey the preferred results because of people associated concerns. The ambiguity resulted by badly handled management issues in mergers and acquisitions have been the foremost grounds for these collapses.