Mergers and acquisitions is a feature that is incorporated as a corporate strategy, management and or corporate finance involving the buying and selling, dividing and combining different entities or companies as a means of growth strategy in the sector or location. When mergers and acquisitions are involved, there is no need for a subsidiary group or wings of the company to be established.
Acquisitions may be classified as either private or public acquisitions. Whichever might be the case, acquisition is simple the purchase of another smaller, ailing business or corporate by another one that seems more productive and capable. During the handover takeover, the buying company can buy the other company out buy up to a 100% on all the assets and business proposals and at times, staff members included.
There are mainly four types of acquisition that is; staged acquisition, multiple acquisition, indirect acquisition and Brownfield acquisition. Each of these strategies has their positive and negative aspects. These are predetermined by the market and what the company in question. For a company that is strategizing to enter emerging markets, it is of relevance and significance to consider the form of acquisition that is best suiting for its strategy.
Staged acquisition is a process that has stages, the initial stage is acquiring the equity stake, and as time goes by, the acquiree increases the equity by up to a 100% over a span of years. This is so that the acquiree gets help from the target as they actively work together. In other cases, the target may be unwilling to straight up sell his assets and possessions.
In emerging new markets, a smooth transaction has to be maintained and achieved at all times. Thus the involvement of the target for some time after initial takeover allows for local stakeholders and investors to get used to the new owner – the acquiree; and this will help in keeping the business running as smooth as possible. Meyer states that
“The design of any entry strategy requires strategic decisions over location, entry mode, timing, marketing, human resources, logistics, and possibly other aspects of business. Entry decisions are motivated by the investors’ global strategy, yet they have to relate this global strategy to the specific local environment, which may require considerable adaptation. For expansion strategies, the same considerations apply, except that certain parameters are given by the existing operations, and changing them may involve considerable sunk costs” (p. 4)
Meyer is simple using logos to emphasize that it is relevant to get enough information, background and future statistics before launching into acquiring a company. For example, the Office for National Statistics released that -Premier Oil Plc. acquired Encore Oil Plc. for a reported value of 0.3 billion in 2012.
Multiple acquisition enables franchising. This is when one big company acquires smaller several and independent ones and merges them into one big company. This has great returns as the company can be able to build a strong market position in the market. It becomes internationally known and recognized. However multiple acquisition can be difficult to run, due t difference in time zones, staple diets according to regions and different head managers, the company policy can be twisted. The McDonald’s chains not only recognized in the UK but internationally, it is one of the most trusted, relied upon and loved food suppliers.
Indirect acquisition may involve hostile takeover. This is an acquisition made outside the focal country with an affiliate in the same emerging economy.in most cases, the prime objective is outside the country of the targeted business. The offer price has to be determined in reference to the date of public announcement. The target company gets the highest possible price taking the reference point of the global acquisition as a benchmark. For example, the Hamlet Holdings based in Scotland UK acquired Disa Holdings a Danish Company. The firm states that Hamlet Holdings “therefore indirectly acquired 74.27% in Disa Holdings India subsidiary Disa India. Since control of the Indian Company changed hands, Hamlet made an open offer for the shareholders of Disa India” (para. 6).
In a Brownfield acquisition, the foreign investor pumps money and as a result of this subsequent investing, the company becomes a ‘greenfield’ in the sense that it is renewed. In most cases, this form of acquisition takes place if the subsidiary is export oriented. The fact that this acquisition is made as a means of reviving what has been previously discarded means that a lot of work and effort will be directed towards this company. It is like starting from scratch and is very costly. The restrictive labor law or law based on foreigner’s taxi may be an obstacle in Brownfield acquisition, the need for a local partner might also slow down the process. However it has a good side to it and that is, the acquiree gets to do whatever they like following their own new plans. This can be taken as a stepping stone for an organization to grow from. For example, Goadsby’s Land division helps “in the sale and acquisition of land and redevelopment sites throughout Southern England”- (para. 1).
Acquisition helps companies and firms to reshape their outline and expand their territories, whichever form of acquisition is applied; should be used as a stepping stone and means of accelerating in the corporative world ladder.
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