Mergers And Acquisitions Cost Cutting Essay - 1,163 words

... corporation considers are particular business areas, products and services desired. The buying corporation does research to find out all about the target company. This research is done by making telephone contact, correspondence and by speaking with third parties (notes).


If things are looking good, a meeting between the two corporations will be arranged. Next comes acquisition planning, the fourth step in the process. In planning, top management must consider location, price range, profitability, return on capital employee, and image compatibility. A very important factor taken into consideration at this time is the scope of integration. It is important to examine this factor because it could lead to failure.


Step five is valuing and evaluation. This involves setting a value and evaluating the potential company. The value is determined by examining the historical nature of accounts, assets, and by referring to the So Hayward Quarterly Index. Step 6 is when the negotiating begins. There are thoughts of sources and methods of funding the business such as internal and external sources of funds.


Step 7, Due Diligence, refers to the management of the acquisition. At this point there is a space between the two firms while the overall purchase plan is reviewed. The most important step may very well be step 8, actively managing the acquisition. This involves the purchase and sale contract, but it also involves the actions plan. Decisions have to be made about how the company is to be run. Topics such as authority, responsibilities, and roles must all be defined.


This, along with the implementation of any new ways, will require extensive communication. A major problem that must be addressed at this point is integrating corporate systems, structures, and cultures. This is one of the most complex challenges, especially when dealing with cross-cultural mergers. Problems arise because, "not everyone wants to adopt someone else's way of doing business. And when you start to form a third culture out of the fabric two equally strong companies, the task is enormous, especially if your trying to maintain high performance in the marketplace at the same time" (Leonard). To deal with any problems, special task-oriented teams are organized who will specialize in this area.


Step 9 deals with financing and finally, the tenth and final step in the successful acquisition process is the actual implementation of your plan as a company. When the steps are followed and everything goes as planned, the result is a successful merger. There will be good operating and market synergy between the buyer and seller, and the newly merged companies will understand the importance of sharing eachother's capital, markets, and technology. After researching mergers and acquisitions, I have come to understand the importance of these two growth strategies. Today's business environment is being dominated by mergers and fast growth. In order be a player in the highly competitive markets, expansion of firms is necessary.


It is almost impossible to achieve high profitability all alone. This growth is achieved through new product development, acquisition of new plants and more machinery, and business development activities. Firms are merging due to pressures from their competitors. Corporations today must understand the financial and technological difficulties as well as the complex problems associated with the actual interaction of peoples and plans when participating in mergers, and they must strive to execute all of t ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: cost cutting, 4 billion, mergers and acquisitions, renault, mar 1999

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