Analysis of the Consolidation of Assets as an Integral Part of Business for Organizations

Analysis of the Consolidation of Assets as an Integral Part of Business for Organizations Introduction Mergers or acquisitions have become a norm for companies aiming at growth. Various companies resort to mergers and acquisition, to form strategic alliances. In majority of cases the underlying reason for these is to guarantee long-term sustained achievement of fast profitable growth for the business. In todays competitive world it is important for various companies to keep up with a rapidly increasing diversified global market and increased competition. In order to gain competitive advantage it is essential to form alliances. According to Megginson and Smart Mergers and acquisitions are major corporate finance events that, when executed efficiently and with the proper motives, can help managers realise their ultimate goal of maximizing shareholder wealth. A merger is the combining of two or more companies into a single corporation. This is achieved when one company or business purchases the property or some other form of assets from another company. The result of this action is the formation of one corporate structure. This new corporate structure retains its original identity. An acquisition is a little different from a merger in that it involves many problems being dissolved, and an entirely new company being formed. Reasons For Mergers: There are many reasons for mergers and acquisitions such as, growth of the company, achieving the economies of scale, for power or better management, stability and to increase market share and eliminate competition. At the core of mergers and acquisition lies the sole objective of maximization of shareholder wealth regardless of the scale of the business. This maximization of the wealth must be both in day-to-day running of the business as well as in the long-term through their tactical decisions. A well executed acquisition or merger will increase the profits earned by increased sales income and by reducing costs. It may also place the business in a position of strategic advantage over its competitors that will enable it to add value by using the opportunity of that advantage to increase profitability. Role of Managers in successful Mergers/Acquisitions: The scope of organizational behavior for a manager goes beyond carving strategies for the functioning of the organization, and can extend further during and after acquisitions to extend financial benefits. The manager has an important responsibility to develop a leadership plan while keeping human elements that arise from such mergers in mind. To create this balanced equilibrium, the manager must use transition strategies of organizational behavior to keep the vision and goals of the organization while motivating and achieving better individual performances Arkin, (2003) shows that, involving Human Resource Professionals at the earliest stages of a merger or acquisition is crucial to help employees adapt to the change. Kitching (1967) stresses the importance of installing managers of change to handle the critical areas needing change to accomplish the tasks of the acquisition. Kitching emphasizes the importance of change management efforts on control in the post-acquisition period. Of late MA research takes into account not only control-based value creation, but also a variety of integration processes through which those synergistic benefits can be realized (Hitt, Harrison, Ireland, 2001). Gadiesh, et al (2002) identified a range of leadership characteristics that might be associated with successful MA outcomes. These characteristics are decisiveness (closing the deal), serving as a symbol and creating momentum (crusading for the new entity), fostering a sense of focus (establishing and communicating the strategic vision) motivating organizational members (cheering on the troops), and providing key cultural and operational guidance (captaining change through integration). Managerial ability must be a non-specialised proclivity, and the leaders of the acquiring company must be men of much greater talent than those of the corporations they absorb In the context of mergers and acquisitions, managers create accountable others (Galpin and Herndon 2000) as Clemente Greenspan, (1998) write, These leaders make concrete the mutual responsibility of all employees, but alert and bind them to everyone elses responsibility . . .this will create a social conscience. Case of BMW acquiring Rover: In the case of BMW (Gould, B 1998) acquiring Rover for 800 millions highlights the importance of managers and effective human resource management in mergers and acquisitions. BMW was easily able to gain entry into a new market segment without compromising its high end and niche market segment through acquisition of Rover. The main reason thats made BMW bought Rover and land Rover is that BMW doesnt have an SUV. the X5 was from the Land Rover team.So it was long term investment by BMW.Also the products and quality, although better, needed some help. And BAE was doing nothing with it. BMW thought about acquiring Rover, as it was too small to survive on its own. However, a more fundamental objective was the enhancement of shareholders wealth through acquisitions aimed at accessing or creating sustainable competitive advantage for acquirer. Such an advantage was to stem from economies of scale, market power or access to unique strengths, for example BMW through acquisition of Rover was able to offer a rage of cars in every category. Successful acquisitions are distinguished from failed ones in a number of dimensions, ranging from pre- acquisitions planning to post- acquisitions integration management. Haspeslagh and Jeminson (1991) contrast two perspectives of acquisition decision making the rationalist and the organizational process. The rationalist view based on hard economic, strategic and financial evaluation of the acquisition proposal and estimates the potential value creation based on such an evaluation. In this case the aim of the acquisitions was to create competitive advantages, strengthen their positions in the markets and to achieve the strategic value creation. BMW/Rover is the examples of acquisitions that have failed to be successful. Despite of the ambitious plans regarding Rovers future, Rover could not bring any profits until the year 2000 due to an investment programme of 500 million pounds per year in the UK. BMW experienced financial distress after acquiring Rover. Robert Hellar writes, BMW has invested .8 billion in a business which at last report was losing ,000 annually. Reasons for Failure: Success of acquisition depends on pre acquisition audit, including a human element audit, clarity of purpose, good communication and understanding of the cultural nuances of the acquired company. Making a successful acquisition requires all three stages of acquisition process namely, preparation, negotiation and post acquisition integration and shall be considered interrelated process. BMW wanted to acquire Rover in order to create a range of cars in every category. BMW was not strong enough to compete on its own and the acquisition seemed to be attractive from the points of extending its range and achieving economies of scale in souring, production, distribution and RD. However, obstacles started since implications of the acquisition. There was a lack of agreement between the teams negotiating a deal and implementing it, so the aims of acquisition were not preserved. Tight secrecy in planning and negotiating is considered necessary to prevent either rivals or the staff of the target finding out about the deal. This secrecy may be one of the reasons for the due diligence audit being somewhat superficial. BMWs preacquisition audit neglected human resource aspects; the audit resulted in some nasty surprises after the acquisition; for example, BMW redeployment of senior BMWs staff to top Rover positions. The chairman of BMW planed to turn Rover into exclusive cars as BMW and the same time he wanted to increase world sales. However, his ambitious target has turned out to be arduous. Robert Stevens (1999) writes On February 11 BMWs chief executive Bernd Pischetsrieder resigned after failing to win the support of his board. He was the kingpin in BMWs million acquisition of Rover in 1994 and is associated with the failure of this take-over Conclusions Mergers or Acquisitions are complex challenges for the management. There are major challenges most importantly employee related issues. Need for competent management is paramount with focus on the human resource audit as whatever, the merits of an acquisition on financial and business criteria, it is people who make it all happen. The employees need to be motivated and well informed about their future within the company. As evident from the case study there was a lack of pre merger planning and non-transparent negotiations resulting in shocks for merged company. Most of all there was a total lack of post acquisition integration strategy resulting out of poor management. The most important attributes for the managers are honesty; sensitivity, competence and willingness to share with the target staff the benefits of acquisitions. These are the most important contributors to success of acquisitions, which were sadly lacking in case of BMW acquisition of Rover.

Climate Assignment Example | Topics and Well Written Essays - 500 words - 1

Climate - Assignment Example Since the scientific community has identified exploitation of fossil fuel as the main reason for global warming, this section has been prosecuting them on various levels, in spite of mounting evidence. This essay discusses one of the most urgent issues in environment study that is climate change or global warming in every context with its definition and various controversies are raging in this area of the studies. The climate change can be broadly defined as the long-term time period shift in the weather statistics including the average climate (NOAA, 2007). One of main concerns in the environmental study is the global warming with the continuous increase in the temperature all over the world. It is also one of the topics that are hotly debated between various sections of the modern society (US National Academy of Sciences & the Royal Society, 2008). The weather scientists who are working in this area are gathering mounting evidences regarding the increasing of the surface warming all over the world. One of such sources is the thermometers that are monitoring the changes in hundreds and thousands of the locations all over the world and recording those changes at a permanent location. The scientists are also getting indirect estimates from such sources as the ice cores as well as tree rings for calculation of change in temperature during past years (US National Academy of Sciences & the Royal Society, 2008). Since, last few decades, there are many theories that seek to explain the reason of the global warming such as the cycle of the sun spots and changes in earth climate, natural variability of the climate or changes due to human activity. As per some people, the main source of the global warming is the sun spots and 11 years Sun – cycle. The energy output of the Sun varies considerably depending upon the abundance of some isotopes of beryllium or carbon atoms and number of the sunspots. But, as per the evidence that is

Unit 8 Essay Example | Topics and Well Written Essays - 250 words

Unit 8 - Essay Example Of course, in order to fulfill these objectives, it needs to build its relationships with its suppliers in order to get the best quality coffee, then with its employees to ensure that they will provide quality service and good products to consumers as part of a great in-store experience; finally, it needs to give back to its environment and communities where it operates in. All of these prove to be consistent, coherent and in line with the financial objectives, by balancing its priorities among the stakeholders. We could see that the adoption of social responsibility to Starbucks’ overall corporate strategy is a strategic move itself, by seeing that the company operates in a larger whole such as the society, and knowing that in order for it to succeed, those who will be affected by its actions should benefit too. Not only will it give Starbucks good reputation and association; it will ensure that it is in line with its strategy in order to fulfill its objectives and live up to its mission. Do you think that Starbucks has grown rapidly because of its ethical and socially responsible activities or because it provides products and an environment that customers want? In your estimation what is the greatest challenge facing Starbucks in the future? Please explain. The success of Starbucks lies in its ability to position itself as the â€Å"place next to home.† By providing products and an environment that customers want, Starbucks has grown so rapidly. However, Starbucks sees that rapid growth and business success is not free—the more successful it is, the more people there will be to pose criticisms for the company and look for loopholes to hamper its growth. One key to having successful business and brand is being liked by the people and forces among its immediate environment. Thus, business ethics and care for its various stakeholders, while not the primary driver of success, is one