Mergers and Acquisition
Company Acquisition
As a CEO, you are trying to acquire a foreign firm. The size of your firm will double and it will become the largest in your industry. What does your firm do and what does the foreign firm you are trying to acquire do? Where are the firms based?
look company is a major company in Ohio Columbus in the U.S. And specializes is the sale of all types of spectacles both for the visually impaired or those with visual problems and sun glasses of all designs. This company has been in operation from 1998 and seeks to expand its operations into the African market by acquiring Yengo enterprises which operates in the major East African cities; that is, Nairobi, Kampala and Kinshasa. As the CEO of I-Look enterprises, I need to take into account the following issues discussed below.
There are many reasons why companies owners decide to sell it. Some of these reasons include lack of finance to inject into the company to make it better, retirement plans, in cases of partnerships, there may be disagreements among the partners, reduction of risks from liabilities, poor health or death of the owner, and finally, poor management of the business due to the owner lacking prerequisite skills (Sherman, 2010). On the other hand, a company may have several reasons to acquire another company. The main reason for acquisition may be a projected increase in cash flows and the combined business after acquisition should add value in the financial and market sense (Miller, 2011).
Before making the acquisition, it is paramount for the buyer to analyze the return on investment envisaged in the transaction. In essence, the acquisition will be carried out under certain limits; the availability of funds, availability of opportunity and the expected return...
Therefore, the buyer should weigh his options and ensure that, by comparing several investment options, the right decision is made. Moreover, it is prudent for the buyer to consider the risks involved. This, in most cases, involves a comparison between all the possible positive and negative outcomes and weighting them by their probability. In other words, investors must be loss averse to safeguard from making losses. However, it is also important for the buyer to realize elemental risks in all transactions and therefore should not be discouraged on intimidated by it (Miller, 2011). In order to fully implement an acquisition, a buyer must follow sure that he prepares himself fully by following some fundamental steps. The first step is assembling a team comprising of both internal and external advisors. This team may be made up of accountants, lawyers, bankers, insurers and valuation experts. The main objectives on this team's shoulders are to focus on the fundamentals of the acquisition process such as the expansion of markets, product mix, integration issues, and the distribution channels. In addition, this team serves as a think-tank and it upon the CEO to ensure that all the team members have been assigned specific responsibilities and have a spokesperson. (Sherman, 2010).
After a well coordinated team has been put in place, the next step for the buyer is planning for the acquisition. This plan is charged with identifying the specific objectives and analyzes the potential targets for the acquisition. This plan also involves identifying value addition and cost savings advantages that will be derived from the acquisition transaction. Generally, acquisitions are triggered by the some pertinent issues such as growth in market, new markets access, new products, access to talented…
