Corporate Valuation StrategyPrepared bySubmitted toWord Count3448 words (excluding content and reference pages)1. IntroductionAn acquisition may be expensive if the things go opposite to our estimation. The rise and fall in the share prices will affect the budgets of acquisitions for Sainsbury. The speculations about the acquisitions may cause hurdles or increase of competition for the deal. If the company which we wanted to acquire is against the deal, there is a chance of increase of competition for buying shares from the board of directors of the company. One may observe a steep increase in the price of the share of the M& S if Sainsbury wants to acquire and can be termed as an opposition for the acquisition.
In case of merger, the Sainsbury has to estimate the pros and cons of the deal. The change of brand value, the results and consequences of co branding can be evaluated. If the co branding is sufficient, then the merger idea can be dropped. In case of acquisition, there is a chance for a fall in share price M& S. This may due to the selling spree of the share holders of M& S in the atmosphere of increase of share price.
This can be detrimental for a company that wants to grow with acquisition. In these conditions the company should offer a price that is higher than the market price for each share it wants to buy to acquire another company. When this happens, the share holders have no other way except selling shares to the company that acquires another. In this case there is chance of increase in the valuation of the combined company after the acquisition.
As the company is offering share price more than the market value, the share price of the combined company will increase than the average share price of the companies before acquisition. This results in the increase of the valuation of the company. This valuation should be protected or enhanced by utilising the technological and infrastructure available after acquisition. (J Froud et al, 2000)2. Strategic fit of M& S for Sainsbury The M& S Company can be considered as a strategic fit for Sainsbury. This opinion is due to the fact that the company is Food retailer and having a bank to cater the financial needs of the customers and the people.
M& S is a company having diversified products like, linen, clothes, furniture and food and drinks. This makes Sainsbury to increase its scope and area of marketing and can diversify its products. The idea of increase of the scope of the Sainsbury arises from the company profiles of Sainsbury and M& S that both the companies have different capabilities of marketing. Sainsbury is concentrating on Food retailing and can extend its scope to clothing by acquiring M& S.
The diversification can be extended to the marketing also. According to the company profile of Sainsbury, the company is not involved in the marketing of clothing and the acquisition of M& S can make this possible.