Merger And Acquisition : Growing New Business

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.

Each of the approaches for expansion – IPO, Acquisition, or Merger – also has weaknesses. An IPO can be expensive and may require 15-25% of the money raised to cover the costs of raising capital in this way. An IPO also requires a tremendous amount of reporting to meet the requirements of the SEC, both for the initial offering and for the future publicly traded company, which not only requires the time and effort of staff members but may also give valuable information to the company’s competitors. All this reporting then creates legal liability for errors and omissions in the prospectus, which adds a further layer of complication. In the end, the former owners lose some control over the business and must share future wealth with the new shareholders. Mergers

When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case

Mergers and acquisitions occur because directors see benefits that could come from combining two or more businesses, which could improve the

Many organizations will either experience a merger or acquisition to try to absorb the costs during unstable market times. Mergers and acquisitions to employee’s usual mean staff reductions and major changes, especially for an acquisition which, is when another company purchases a company and becomes a new company. (McClure, 2016)

One key financial driver would be to gain new capital assets. Merging with another company is a faster and often a more inexpensive way to gain capital assets without building new facilities and hiring inexperienced staff. Merging allows you to gain

Why do most mergers and acquisitions (M&A) fail to create value for the acquirer 's shareholders? What are the main reasons in your opinion?

Once again, “A takeover is when one business buys another business. This tends to be more hostile as the buying business is the main one to benefit.” There are some advantages you can gain from this. Firstly, likewise to merging, there can be international growth. “Businesses can make their services or products available globally by acquiring businesses in various locations internationally. For instance, Belgium brewing company, InBev took over Budweiser for $52 billion in 2008 in order to expand its presence in the U.S. market and create one of the largest consumer beverage companies in the world, according to The Times. Due to the acquisition, profits of the company rose by 11 percent in 2011, according to France 24.” (http://smallbusiness.chron.com/)

Of course, selling a business has its drawbacks, as well. First, the buyer often requires that the management team from the acquisition target stay on board for a specific period of time and achieve certain key performance indicators before receiving the entire payout. Often, there is a lump sum delivered up front, and then incremental payouts upon achieving KPI’s. This could be frustrating to Tom and Tom, as they would relinquish all of their independent decision-making powers and have to take the back seat as employees. Typically, this is not a comfortable position for entrepreneurs to take. Also, Tom and Tom built up a loyal and talented staff of employees at Nantucket Nectar. Acquisitions are typically driven by synergies and, as a result, certain employees could be terminated in pursuit of cost savings. Finally, Tom and Tom would have to deal with the fact that their company culture would be at risk. Often, the buyers culture engulfs that of the company being acquired.

In this paper, I will provide an explanation for the business combination method I selected in expanding the corporation by acquiring another firm, the reason for selecting that business combination method, and how the purchase will grow the business. I will also analyze the accounting requirements for the business combination method I selected and how I determined goodwill was impaired and the financial impact of such impaired goodwill.

Growth and profit are the reason for companies to merge. In acquiring or merging with another company it helps gain customers in different markets along with not having to build a new company from scratch. Therefore, merging with another company helps limit competition. However, as with most everything else in our country, there are rules and regulations that prevent some mergers. According to Colander (2010), merges need to be reviewed by the Justice Department and merges cannot result in a high percentage of market share. This is to prevent monopolies from occurring. When companies feel that they have grown as much as they can here in the United States they look toward globalization.

The main goal of a business combination is business expansion. The process of two or more companies coming together under a common control in order to expand is known as business combination. There are two methods that a company can expand, which are by internal expansion and external expansion. First, internal expansion is the ability to increase business operations without any outside activities, such as advertising and marketing. Secondly, external expansion is when one company overtakes another company in order to be more successful. External expansion can be achieved through vertical integration, horizontal integration, or through a

For example, Microsoft’s acquisition of Skype is a product acquisition. Then, some companies can be acquired for non-saleable assets. For instance, the asset can be anything, even simply a customer database or a media property. Another advantage that can be taken from going into acquisition is acquiring a new talent. Google is very famous for doing such kinds of acquisitions. This company by buying businesses is taking the most important from each organization. For instance, engineers or IT department, and afterward, destroy the parts of the bought company that they don’t need. Companies go through mergers and acquisitions for the target goal of improved financial performance for shareholders. Profit is the main aim of almost every organization, so at the end of the day, more money is always an objective and advantage from merger and acquisition

We’ve been asked to review the case Study, Growing a Company by International Acquisition” retrieved https://my.uopeople.edu/pluginfile.php/244173/mod_book/chapter/140506/UNIT%207%20-%20Case%20Study%20-%20dsgplc_13_full.pdf about the Davis Services Group and how their business changed and developed by its strategic management.

There are a number of reasons why you may want to buy another company. For technology and pharmaceutical companies, gaining access to technologies or medicines that you do not have can be accomplished through an acquisition. It may be more cost effective to buy a competitor than to develop a new product on your own.