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Acquiring another company

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You are part of a company who has made the strategic decision to acquire another company. There are two possible implementation strategies for this decision:

A. Merge the acquired company into your company. The result of this strategy will be one company containing the elements of both companies.
1. What are the pros and cons of this implementation strategy?
2. How will you know if the strategy is working?

B. Operate the acquired company as a separate business entity. The result of this strategy will be two separate companies under one senior management "umbrella" (the senior management team that is responsible for running both companies).
1. What are the pros and cons of this implementation strategy?
2. How will you know if the strategy is working?

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Solution Summary

You are part of a company who has made the strategic decision to acquire another company.

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In the Scenario A, where a new merged entity will be created, the major prons are those related to operating efficiencies due to economies of scale, more bargaining power in terms of raw materials from suppliers, access to more and better resources, pooling of human resources and enhanced management strength, access to newer markets, more customers and thus increase in market share, etc. A merged entity, if in the same product line, create a significantly bigger entity and helps in consolidation of the industry if the two entities command major market share in the industry. It greatly enhances the revenues by not only providing the merged entity with increased access to markets and customers, but also by significantly reducing cost of operations.

The major cons of this strategy is that due to significant differences in ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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