Merging A. Merging with another company signifies bringing two different companies together and working collaboratively for a common goal as well as objective. With regard to the provided situation, the company acquiring the other firm and merging it within the existing company has certain advantages. Firstly, technological skills and resources of the acquired company can be used in the process to make the business grow and to cater to larger consumer base with the provided product/service. Secondly, it increases the economies of scale along with providing tax benefits. Moreover, shareholders could get maximum return on their capital invested due to merging.
However, there are disadvantages that can be caused due to merging such as, it’s a time consuming process which also leads to disruption in business. In case if through such merger process, the merged business becomes too large then it can lead to diseconomies of scale leading to additional cost incursion. In addition, internal competition resulting in conflicts might arise between the two merged companies as well as within their staff. The other disadvantage of merging through acquisition is that it takes certain amount of time to adjust for both the companies with each other’s work culture (Eckberg, 2007). To know whether the strategy is working fruitfully according to desired expectations, it needs to be observed that quality of products as well as services offered has improved or not, if the merged companies are able to offer higher value of goods and services to the consumers.
Another important aspect is increase in shareholder wealth as well as increase in profit-earnings ratio. Apart from these factors, other aspects such as increase in market share, enlargement in demand of services & products, increase in market share are the parameters which can show that merger applied is working in favor of the companies or not (Kyriazopoulos & Petropoulos, 2010). B. It can be recognized that if an acquired company acts as a separate entity it has certain advantages such as it can result in financial growth of both the companies.
The separate business entity can attain economies of scale on an individual basis. Moreover, it reduces competition between the acquired and the acquiring companies and their staff.
Both the merged companies can increase their customer base using the common brand name. Since each company grows financially both of them can increase their range of products and services offered without being competitive to each other. Disadvantages that might occur for the companies working under a common senior management are any of the company might feel ignored with regard to the other one. At times, it can be observed or felt that the management is partial to someone in respect of giving powers, authorities along with responsibilities (Institute of Chartered Accountants of India, n.d. ) To comprehend whether the implied strategy of operating an acquired company as a separate business entity is giving the desired result, various evaluations and monitoring tools such as time to time reviewing of the individual organization’s performance with previous records needs to be utilized.
Moreover, comparing the performance with immediate competitors would also help in this situation. Setting monthly targets or quarterly targets & evaluating them minutely would also help to know whether performance of both the organizations is up to the mark or not.
Another important aspect in this regard is profit of both the organizations working under a common senior management, whether it has increased or not from previous quarters or years should also be judged. All these factors can help to recognize the organization whether they are performing better or not as compared to the expected intensions. References Eckberg, D. K. (2007). Structuring mergers and acquisitions. Retrieved from http: //www. skellengerbender. com/publications/PDFs/business/mergersAcquisitions. pdf Institute of Chartered Accountants of India. (n. d.). Merger, acquisitions & restructuring. Retrieved from http: //188.8.131.52/19356sm_sfm_finalnew_cp13.pdf Kyriazopoulos, G., & Petropoulos, D. (2010). Mergers & acquisitions. Retrieved from http: //kastoria. teikoz. gr/icoae2/wordpress/wpcontent/uploads/articles/2011/10/050.pdf