Acquisition Strategy Essay

2406 words - 10 pages

IntroductionInternational mergers and acquisitions are among the key corporate strategies multinational corporations use to expand, diversify, or consolidate their businesses. An acquisition occurs when an organization acquires sufficient shares to gain control or ownership of another organization. The motivation of acquisitions is essentially to increase and strengthen both buying and selling company's financial health and produce advantages for both companies if both will continue independently. The expectation is that the combination will result in increased efficiency, economies of scale, widening of markets, greater purchasing power and so substantially increased profitability. The process of acquisition includes formulating business strategy, locate and identify markets and companies, investigate and due diligence studies, negotiate legal, structural and financial issues, integrate each functional roles and motivate long-term alignments.Unfortunately, there are many issues attributed to acquisition failure because of poor pre-acquisition screening, corporate culture dynamics, overestimation of the value that can be created from an acquisition, the high cost of acquisition, poor selection decision with companies that were strategically mismatched, strategic divergence, procedural problems as well as firm competencies to integrate and optimize both the buying and selling companies in functional areas. Acquisition can have unfavorable impact on profitability if it is not managed appropriately. Guarding against acquisition failure requires structured screening, good bidding strategies, positive attempts to integrate the acquired company into the organization of the acquiring one, and learning from experience. In this assignment, the strategies for implementing a successful international takeover will be discussed, in relations to the management and functional issues.Management and Functional issues of AcquisitionTo integrate companies following an acquisition, the most important challenges that an organization faced will be appointing the right team, especially the top management people, to structure it appropriately, defining its agenda, and building the trust that enables its members to work well together. Buchanan et al. (2002) identified a range of leadership characteristics that might be associated with successful merger and acquisition outcomes. Organizations who fail to overcome these challenges are responsible for the ego clashes and politics that are often the root cause of spectacular failed mergers. Top-down change fails because there are possibilities that at every step messages get diluted, so that each succeeding one seems less compelling and less authentic. While this may be true in certain circumstances, acquisition still requires direction from the top because this is the only way to initiate change throughout an organization. The change required to integrate companies cannot be driven from an entrepreneurial business unit, an...

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