Business management Assignment Paper
Business management Assignment Paper
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Deliverable: A Written Report, 25 pages, lines spacing 1.5, with 11 Times New Roman Format, excluding cover page, appendix, and references.
Questions
Part One: (1 attachment: PowerPoint-M&A Theories and Major Synergies Models)
1- One of the first M&A steps is to screen the market in order to identify potential targets. Suggest three potential targets and document your choice with qualitative and quantitative analysis.
The three targets companies, but we need to do qualitative and quantitative analysis
• www.engilitycorp.com
• www.olivegroup.com
• www.dji.com
2- Describe each of the potential targets using the relevant M&A theories and the relevant synergies valuation models, as listed below.
• Synergies: Operating Synergy & Financial Synergy
• Valuation: The Discounted Cash-Flow (DCF) Model, The Discounted Future Earnings (DFE) Model, The Multiple Model, The Comparable Transactions Model
3- What are the potential synergies that may come from merging with each of the identified targets? Suggest an economic assessment of these synergies.
4- Based on your assessment and analysis done in questions 1to 3, recommend the firm among the three selected ones that should be subject to be merged with Tawazun. Recommend an execution plan for this merger within a realistic timeline and illustrate how and when the synergies will be achieved.
A) Explain each of the below on the three Targets Selection Framework
• Profitable and financially healthy targets: Gross Profit Margin, Net Profit Margin, Current Ratio, Quick Ratio, Dept to equity, Return On Equity, Return on Asset, EPS, P/E (for each of the three companies)
• Stability of the revenues
• Publically listed or private?
• Maturity (age of the firm)
• Geographical consideration
• Business model similarities and/or complementarities
• Existence of a Competitive advantage or not
• Regulated industry/sector or not
• Size: too much small or too much large (implications on the M&A financing scheme)
• Dependence on one customer or not
• Long-term contractual arrangement with suppliers?
• Law suits?
B) Overview of the Selected Targets
• Industry
• Products
• Business model
• Governance structure
• Financial facts and performance
• etc.
C) Use one or more of the valuation models to assess the potential synergies
D) Be conservative (not too optimistic…)
E) Cover different dimensions as much as possible
• Operations
• HR
• Finance
• Strategic
• IT
F) Recommendation and first draft of M&A Planning
Part Two: (3 attachments: Reading 4-M&A Execution Imperatives, Reading 3-a- Performance Assessment in M&A, and Reading 3-b- Performance Assessment in M&A)
5- According to Wang and Moini (2012) and Zollo and Meier (2008), what are the different methods used to assess the performance of M&A? Describe them.
6- According to Arthur et al. (2003), what are the main executions problems for which M&A may fail? Describe them.
7- According to Arthur et al. (2003), what are the two M&A integration imperatives? Describe them.
8- In question 4 of the part one, you recommended and execution plan for a target integration. Enhance this plan using some of the relevant performance metrics.
9- Explain how your recommended execution plan prevents from M&A execution problems?
SAMPLE ANSWER
Introduction
According to Basmah and Rahatullah (2014), mergers happen when organizations verify that consolidating their business operations with an alternate venture is of profit. This is generally helpful as expanded quality for the shareholders. While a merger of equivalents can happen when two organizations consolidate, this is not regularly the situation. Rather, the two organizations will go to an assention in which one of the organizations buys the other association’s regular stock from its shareholders in return for the buying organization’s basic stock. Here and there, money or different sorts of installment are utilized as a part of request to encourage the value exchange. Nonetheless, the most well-known methodology for a merger is the stock-for-stock plan (Adomako, Gasor & Danso, 2013). At the point when a merger happens, it is uncommon that there is an exchange of stock on a coordinated premise. This is almost constantly finished with a proportion. This is on account of the organizations are seldom of precisely the same size. For instance, Company A may be obtaining the stocks from a littler Company B. In the event that Company A is three times the extent of Company B, then the degree would be 1:3. As such, for every three shares of Company B, Company A would pay with one of its own stocks.
Part One
Engility
This is a company formed a couple of years ago to offer various technological solutions. For the past three years, the company has been busy providing critical services and support to the American department of defense and Federal civilian agencies with technological solutions to these bodies. In the recent past, the company has expanded their operations in line with their capabilities and brand in order to take advantage of the market opportunities. Therefore, the company is determined to enhance value for their customers by providing business services that are benchmarked with other similar businesses in the industry. The company has a workforce composed of character, skills, and expertise that are necessary for undertaking the most challenging tasks that may arise in the course of their operations. Since the company operates in more than 40 countries, the company has a wide market for their products and this enhances their strategic position (Engilitycorp, 2015). The company boasts a global of excellence in command and control system software, engility services, global security and engineering solutions, linguistic operations, and technical support.
Olive group
This is a company that provides resilient safety, security, and technological systems that support the core business functions in the oil and gas sector (Olivegroup, 2015). The oil and gas industry continue to venture into remote and high risk areas due to increased demand for hydrocarbons and this requires technological solutions to minimize such risks. The Olive group takes advantage of the need to provide advanced security, safety, and technological solutions in the energy sector that is subjected to high risk operations. In addition, the Olive group is determined to take care of the criminally and the politically motivated threats in the oil and gas infrastructure that increases with increased global demand.
DJI
DJI is a company that provides creative tools used to capture images that were previously out of the reach of human beings. The company operates flying cameras with the ability to move in the air and capture images that are then transmitted to the central server for adequate analysis. The DJI products are able to capture professional and high quality images and videos in every corner of the world, thus enhancing surveillance systems. Through their commitment to R&D and innovation, the company has managed to produce easy-to-use devices combined with advanced technologies and modern designs that promote the ethos of “form follows function”. Due to its strategic headquarters in the Chinas Silicon Valley, Shenzhen, the company benefits from direct access to raw materials, creative talent pool, and other important supplies that improve their chances of success (DJI, 2015). Due to the nature of their products, DJI has successfully managed to redefine various industries by accomplishing safer, faster, and more efficiency that before.
Analysis of the marker screening
From the above analysis, the three companies can form a very successful merger due to the nature of their operations. Since the companies operate in related environments, their merger can create more efficiency leading to improvement in their overall productivity (Cefis, Marsili & Schenk, 2009). This is because the security operations provided by the two companies will provide solutions to the highly risky oil and gas operation of the other company. In addition, the ability of these companies to form a merger will enhance their market power due to increased quality of their products. Due to the quick growth anticipated with mergers, the companies will have enhanced market power due to their diversified product portfolio. Since these three merging companies operate in related industries, they are likely to share information related to the market of their products and this will have them in formulating an advanced business operation strategy.
Operating synergies
According to Weber and Shlomo (2012), operating synergy is a type of a synergy that results to companies increasing their income and growth by the use of the same level of assets. It is useful, and divided into the four parts. These four parts are inclusive of the economies of scale that makes the organization to be more efficient in its operation due to combined effort following the merger that has been done. There is more profit that is evident in the company when merging is done and this increase the profitability of the company (Vu, Shi & Hanby, 2009). This is only evident, where both the parties are involved in the same kind of business that is headed in the same kind of direction with the same aim of profit making as the main outputs. Operating synergies give yield to a more increased pricing seen to be experienced by the company at hand the company that has merged will have high increased profits and higher margins following the reduced competition that is now evident. When companies come to work together, there is combined strengths will provide diverse strengths that will propel the organization forward. On the side of technology, it will improve because, the strengths that were employed by the single companies will now be put together leading to high productivity. Operating synergies will lead to a combination of multiple strengths and higher growths in the market (Schraeder & Self, 2003).
Financial synergies
These are type of synergies that are related to payoffs and in some cases, they can related to low, high or even both pay offs. When projects are of low rate, there is a high cash flow in such an organization and the value of that firm is highly increased following the high returns in the same organization (Schief et al, 2013). When a big company acquires a large company, the value of that big company will automatically increase due to the acquisition that has been made. This will further define the debt capacity of the two companies that have merged together to be highly increased because, there is consolidation of cash flows and other accounts of the two companies (Rosi, Shlomo, & Raviv, 2013). There is what will be termed as a tax case resulting from the acquisition of the smaller company the larger one. The companies will tend to benefit themselves by ensuring that that they manipulate the taxes by ensuring that they write off loses of other companies to reduce their tax liability. This will of high benefit to such firms who will evade the huge taxes they are entailed to pay but will be a loss on the other side if the laws governing the country finds out the trick the company is using to evade responsibilities. Whenever there is diversification, the firms are liable to face huge problems and more in the case of the investor’s diversification.
Discounted cash-flow (DCF) model
This is the main valuation model that is highly considered by companies that are about to carry out the mergers and acquisition process (Pillania, 2011). When the cash flow of a given company is well analyzed, it is thus very easy to tell the value of that given company and the amount of money that ought to be paid for it to be acquired by a much bigger company. The value of the company will give its estimated cash flow in the future; hence the other company acquiring it will tell if it will be able to benefit from it. This is a very rare opportunity that is used to measure the attractiveness of the investment opportunity to the acquiring company in a more realistic way (Nogeste, 2010). The cash flows of the firms is done separately, then from the combined firms and this is done to get the actual analysis of each firm with the aim of getting the true value and the benefits that can be experienced by the firm. The calculation follows two models that are to be followed to ensure that the actual value of the company is well tabulated. The model involves the forecast period and the terminal period, which have to be analyzed to get the cash flow made during that time. After the computation of the company’s value, it is prudent to get the cash flow over the life of the company in comparison to its present value. This is useful in analysis the amount of money the company big company acquiring the smaller company will be required to pay (Merikas, Polemis, & Triatafyllou, 2011).
Discounted future Earnings (DFE) Model
This is another type of model used in the analysis whose main aim is to relate the present value earnings of the given firm with its synergy value in the same given company (Mehta & Hirschheim, 2007). The company’s present value of the future earnings in most cases, it recommended to be compared with its synergy value especially to the smaller company and that of the two companies combined to give the credit worth of all.
Multiple models
The product of the flow of synergy is well tabulated by the use of this model and it is also compared with the value of the synergy that is present in the company. Comparison of the two firms is as well done through the use of this model, thus, for the comparison to be more effective, the common variable present in both the companies is kept constant. In the case of multiple cases, the synergy of the individual company is highly recommended to be compared with the difference between the multiple values of the firms at the combined state to ensure that the multiple value is accurately tabulated (Malik et al, 2014). The multiple value of the combined firms will be excess as compared to the value of the individual firm implying that in the case of multiple tabulations, the multiple firm have to be involved in whole.
Comparable transactions model
The common variable, which is maintained constant to all firms, is compared with the synergy and the product of the synergy that flows in all the organizations under the comparable transactions model. This also implies that, the comparable transaction model is useful in the comparison of the comparable transactions with the company’s synergies.
Question three
Operation synergy
There are two types of potential synergies that come as a result of merging the three companies inclusive of the financial and the operating synergies. On the side of the operating synergies the economies of scale on the side of the company’s will be said to increase following the merged efforts of the three companies. The organization will now be more efficient in its operations due to, the combine efforts that come as a result of the merging of the companies. The cost incurred in the production of the company’s product will be reduced, leading to increased profit to the company (Huang & Kleiner, 2004). This is because all the parties are therefore, involved in the same type of business that entails all having the same goal of making profit and improving the performance of the company. Once the companies have merged together, the competition power will be reduced; thus, the power of pricing will be increased at a very high rate. This will increase the company’s sales and profit at the same time; hence increasing the value of the company. Merging of three companies leads to a high combination of the multiple strengths that may result to the way of success to the newly formed company. The strength of one company might compliment the strength of the other company to mean that, when all these strengths are combined together the capability of the company will be increases to a higher percentage (Fiarield, Ogivile, & DelVecchio, 2002). This will therefore result to higher growth in the market, which will mean all the customers of the old companies will now be customers of the new company. The potential of the market growth will highly be increased such that, no matter the pricing of the products, people will tend to buy the products of the company because they can only access them there. The potential of the market growth will highly be increased such that, no matter the pricing of the products, people will tend to buy the products of the company because they can only access them in that one company.
Financial Synergy
This is termed as good potential for growth for the newly formed company that will now have a guaranteed increased number of customers old and newly formed ones. On the side of financial synergies that are formed as a result of the merging of the three companies, the cost of capital may be high, low or even the two circumstances can as well be noted depending on various situations in the three companies. The organization will have a high cash flow that will result from the low rate of projects that is evident in the company. The debt of the newly formed will be rated higher than before due to the companies that have merged to form the new company; thus, combining their debts together (Dorota, 2012). This will be a disadvantage to the new company that will have to pay huge amount of debts, for it to pave its way through. The debt will increase as a result of consolidating the cash flow, accounts of all the companies and other accounts belonging to the individual companies as well. In some instances, the company will tend to manipulate the tax that it ought to pay just for the sake of its own interest gain. This can be done through the use of the profits of one organization to cancel the losses of the other organizations to mean that, the tax liability of the new organization is increased (Clayton, 2010). The three companies that have merged together were from diverse grounds with diverse leadership, management that might be a problem to the new company, which is at a high risk of encountering insurmountable challenges in the incorporation of the diverse operations from the three companies.
- Assessment
Based on the above assessment, the best company to be merged with Tawazun is Engility since they are closely related in the sense that they both deal with military technologies. In this regard, it would be very easy to streamline the operations of the two companies since they have related clients. Since the companies come from very different markets, the merger between them is likely to cause an improved market for the merged companies. Engility alone operates in more than 40 countries and this makes them a strategic partner for the merger with Tawazun due to the large nature of their market. Englity also forms a strategic partner of Tawazun due to their global excellence in command and control software, global security, and engineering solutions.
Execution plan
The beginning of the execution plan will begin with creating a unified organizational culture for the merged companies since the two companies comes from diverse cultural environments. The next stage will involve merging the vision and mission of the companies. The next stage involves integrating the personnel of the two companies into one unit to build the team momentum required for the success of the organization. This will help to develop the human capital that ensures the planning and retention of the best talent needed for the proper implementation of the company’s mission and vision. Integrating the cultures, formulating mission and vision statement, and development of the human capital can be done within one year period.
After the actual merger, the synergies will automatically be obtained and this will help the companies to create some opportunities that were not available in case they were working independently (DivyaPriya, 2012). After the merger, the companies will form one big company and this will enable them to achieve economies of scale, resulting into more profits. Merger enables the company to reduce the competition among them and this increases their pricing power, leading to more profits from their sales. In addition, the merger will enable the companies to have a combined strengths that if they were operating independently. Since these companies come from diverse geographical locations, they would achieve higher growth due to the increased market presence. The merger between these two companies will also result in financial synergies, such that their debt capacity would increase as their cash flow and other accounts are consolidated, leading to increased debt capacity.
Part 4 A.
A vital part of the successful merger or acquisition is proper evaluation of the target company (Schef et al, 2013). Like nearly any sales transaction, this can result in differing opinions. The company selling stocks will want the price to be high. The purchaser will work to achieve the lowest price. Since there are often many millions of dollars involved, methods for determining the value of a company have been developed. One method for establishing the value for a company is to use comparative ratios. Many ratios exist, and the most common of them are the Price to earnings ratio (P/E ratio) and the Enterprise Value to Sales Ratio (EV sales). The P/E ratio includes the acquiring company make an offer which is some multiple of the target company’s earnings. Examining the P/E ratio can provide the purchasing company with guidance concerning the multiple which should be used in the purchase. A higher P/E ratio will generally lead to the use of a higher multiple. The EV sales ratio allows the acquiring company to base their purchase multiple on the revenues of the company (Rossi, Shlomo, & Raviv, 2013). If the company has a relatively high EV sales ratio, then the multiple paid for the purchase stocks will be higher.
Another important factor to consider when determining the value for a company is its replacement cost. If the value for the company were the sum of its staffing and equipment costs, the company doing the acquisition could purchase the staff and equipment in order to evoke the acquisition. This type of evaluation is used primarily when the assets for a company are tangible such as vehicles, mines, and products. Companies which are in the service industry may have assets such as ideas and people, which do not lend themselves to this type of valuation.
Gross profit margin is the type of profit in a given company that is calculated with the selling price multiplied by 100 and it can best be defined as the selling price that is turned to profit of a company. Return on assets is well used in showing of how a company’s given assets are in the fore front of giving high returns and profits to the same company (Nogeste, 2010). The best way of tabulating the return on assets is by dividing the net income of the same company with its average total assets that will give the actual tabulations. This will give the actual figure gained by the company after it has employed the usage of its assets in profit making.
The current ration of the company is its financial ratio hat is used in the measure of resources of the firm that it will use in the paying of acquired debts either through the bank or any other loner channel (Pillania, 2011). The company’s market liquidity ratio can be compared to the company’s current ratio; hence, tabulated by diving the current assets with the current liabilities. This is the best way of a company that is interested in comparing of its current assets with its current liabilities that it will be entailed to surrender on failure of paying the acquired loan.
Quick ratio is the measure of the how fast a company will be in a position of using its available cash that will be needed to clear its liabilities within then given time as earlier agreed. The faster the company uses its money to clear its debts the higher the position it will attain of acquiring bigger loan from the same loner. The quick ration is obtained through the addition of the accounts receivable, the cash and cash equivalent with the marketable securities whereby, the total sum is divided by the current liabilities.
Debt to equity ratio indicates the relative equity that belongs to the company’s shareholders equity in combination of the debt a company has been in a position of acquiring to finance its assets to work accordingly (Mehta & Hirschheim, 2007). This type of a ratio is mostly termed as the risk leverage a company has to incur in its operations of expanding the business to higher heights. To obtain debt to equity ratio, the total debt that a company has acquired is divided by its equity. This will therefore, give the financial leverage of the company as a whole and corrections will be done on the right places.
Return on equity will best give the required return to the company’s interest by measuring all its efficiency of a company on how profit is given to the shareholders on each unit. It can best be tabulated by dividing the net income with the shareholder equity of the given company to ensure the returns are equal to the fiscal year net income. This is a ratio that is given in percentage terms; thus, also referred to as the return on investment. It can be given by tabulation of the Net Income that is divided with the Total Assets.
Stability of the revenues will have an impact on the success of the merging companies such that the more stable their revenues, the more profitable the merging venture is due improved profitability. Since both the three companies have stable revenues, they are likely to take advantage of the synergies created by the merger to increase their profitability.
The nature of the companies, whether public or private, affects the success of the merging process. For public companies, the process of merging usually becomes complicated since it involves government bureaucracies and processes which often take long time to reach conclusions. In addition, some government entities are usually guided by some laws and regulation that requires the parliamentary not to continue with the merging process. For the private companies, the merging process becomes relatively easier since the ownership of the companies is in private hands with main focus driven by profits. This is quite different for public listed companies since the government is also highly concerned on other factors such as the loss of employment and environmental impact of such mergers. Since all the three targets are privately owned, the process of merger is simple and faster due to less bureaucracy involved.
Maturity age of the firms also determines the success of the firm, such that the firms at their maturity level are likely to carry out successful mergers than firms at their advanced stages. Firms are maturity level are have reached their final stage of their growth and have nothing left apart from forming mergers and acquisitions to form multinational corporations. Since all the three firms are at their maturity levels, it becomes simple and profitable for them to form mergers that they will use to benefit from opportunities that come from globalization.
The geographical location should always be considered for firms intending to form mergers since it determines the level of market penetration of the proposed merger. Companies that are located in different places have more capability to increase their market presence that those companies located in the same geographical location. The fact that these companies are located in different locations enables them to form strategic partners for merger that would result into increased market presence.
The nature of the business model also affects the success of the merger, such that firms with similar business model integrate their business activities easily than those firms with different business models. All the above companies strive to achieve innovation in their businesses, they form potential targets for the merger due to similar business model.
The existence of competitive advantage also has an important role to play in the merger process since such combination of attributes supports the synergies developed (Nogeste, 2010). Since all these merging companies have highly qualified staff, this gives them a competitive advantage necessary for the merger process. In addition, the location of these companies makes it possible for them to attain natural resources that enable them to make their products with lots of ease. All these merging companies also focus on innovation from new technologies such as robotics and information technologies. According to Pillania (2011), the competitive advantage gained from these individual attributes will enable the merging companies to outdo their rivals in the industry and realize more profits needed for the success of the organization.
The nature of the industry, whether regulated or not, determines the success of the overall merger of the organization. According to Nogeste (2010), the technological sector is not much regulated and thus companies have enough freedoms to explore their innovative strategies as long as they are observing the patent and copyright laws. These merging companies have rare patent litigation incidences and this means that they are well prepared in observing their patent and copyright laws. Therefore, the regulation in the technology industry is less likely to interfere with their operations.
According to Basmah and Rahatullah (2014), the size of the merging companies has implications on the financing scheme. All these companies are medium sized companies and this implies that they have moderate influence of the financing scheme. Since the size of the companies is somehow similar, this will highly positively impact the merging process due to similar perspectives.
Both Engility and DJI are highly dependent on one customer, which is the government, for their supplies. On the other hand, the Olive group has a diversified market for their products. In this regard, the three companies are not dependent on one customer since others serve the government while the other serves the general publics. This diversified customer base enable the merging companies to have a diversified market for their products and this reduces the nature of risk due to global market risks.
The nature of contractual relationships with the clients also determines the success of the merging companies. If one of the merging companies have long-term contractual relationships with their suppliers and the other is not, the process of negotiating the contract agreements may become complicated (Cefis, Marsili, & Schenk, 2009). On the other hand, if both companies have short-term contractual relationships with their suppliers, the process of merging the companies becomes very easy and simple. In addition, the lawsuits arising from any company should be determined before the merging process. This is because companies with lawsuits are risky to merge with since the legal battles can result into huge financial and reputational losses for the companies. In turn, this would impact the level of profits realized by the organization. In this regard, it is safe and secure to merger companies which are free form law suits in order to reduce the risks that may result from the legal proceedings.
Part B
Overview of the selected Targets
The above mentioned firms operate in the high-tech industry that is characterized by accelerated innovation cycles, margin pressures, and intensive global competition. In addition, this industry is characterized by complex supply chains. In order to competitive in the high-tech industry, a company has to respond rapidly to the highly changing market conditions and demands and incorporate into their strategies. Therefore, such companies needs to have a an efficient and reliable landscape to support their complex business processes at all time of their operations (Clayton, 2010). Due to the capital intensive nature of the company, it barriers to entry are so high that only few players exist in the market.
The products for these three companies are related to robotic cameras with the potential of providing surveillance to areas that are beyond the reach of human beings. These cameras have the capability of capturing images and video from all the corners of the earth with the aim of improving security and reducing the risks in various types of businesses. These products can also be used in high risks operation such as military operations to provide surveillance and support where necessary.
The business model for the three companies is somehow the same since both of them apply the concept of innovation to create hi-tech products. Both the three companies invest a lot of money in R&D to create cutting edge products that can perform highly sophisticated security surveillance. The In addition, the governance structure of the three companies is also related since they are both headed by the CEO who is supported by various level managers. In the past few years, these three companies have had a strong financial performance with strong asset based and high sale. Therefore, these companies shows strong financial performance and their financial projections are also bright.
Part C
The merger between these companies can also be viewed under various valuation models. The discounted future earnings model can effectively be used to analyze the performance of these three companies in case of merger. The discounted future earning analysis helps to determine the current value of each of the merging companies in accordance to their estimated cash flows. The present value of the future earnings for both the organizations is then calculated for both the companies and the combined firms separately.
Part E
The operations of the company are somehow similar since they both operate in the high-tech industry. The operations of the company are geared towards achieving technological solutions that are capable of providing enough security in the most effective manner. The human resources available for these companies are also similar from the fact that they both employ highly skilled and talented pool of professionals to drive innovation from the companies. In addition, the human resources should develop and maintain a highly skilled manpower to support R&D initiatives. Since these companies have readily available market, their sales provide them with huge financial strength. In addition, these companies are credit worthy and can easily access loans for financial to finance various projects. Security is one of the main concerns for most organizations since breach of it can result into series of losses. In this regard, these three companies operate a strategic business since they have a wide market for their products across the industry. These companies take advantage of the development in information technology to develop their products, leading to improve efficiency in their operations.
Part F
I recommend that merging of these companies will result into positive synergies that would result into increased market presence and improved sales. In addition, the merger between these companies would result into increased talent pool, leading to improved chances for innovation and subsequent development of the company.
Part two
- Methods used to assess performance
There are Different methods of assessing the performance of Mergers and acquisition of a given company. They are inclusive of the level of analysis, time dimension that is classified into long-term measurers and short to medium measures (Wang & Moini, 2012). The other method is the complete model that is basically used in the analysis of the logical progression that entails the consideration of the firm performance with its short term acquisition. The integration of the companies will enable the new company to reach its desired target level by ensuring that the desired level is attained for the success of the company. The task level of the new company will be highly increased following the merging of the two companies as the control systems of the company will be well aligned for smooth operations. When the degree of target level is attained by the three organizations in a satisfying manner will be the task level obtained by the merged organizations (Zollo & Meier, 2008). The transaction level will be well improved to ensure that, the company is well encompassed to ensure that the revenue growth is high together with the efficiency of the cost that is incurred in production. This will mean that, the acquired and merged companies are now having a good transaction level that can be measured by the amount of value that is generated by the new company. The value creation is very important as its realization by the new company will aid boost its transaction level that will be a measure of its new value after merging has taken place.
The performance that will be now be evident after the acquiring and merging of companies has taken place; thus, being in a reputable position of clearly the performance of the firm that is newly formed. In a firm there is a variation that mostly occurred during the time of relevance when the business plan was to be executed is also used in the definition of the company’s level of performance and its credit worth. When the performance is at a high level, the rating of the company’s level will be higher compared to other type of business.
When dealing with the matters of time horizon there are different classification that are followed inclusive of the long term measures together with the short to medium measures that are followed to ensure time is not wasted anyhow rather should be used for the well-being of the company. The period of implementation will be covered by the completion of transaction that is needed to be covered by the firm in combination of the consequent creation (Wang & Moini, 2012). The quality of the conversion of the information technology and t effectiveness of the knowledge e that ought to be well transferred defines the short to medium measures that ought to be employed for the job to be well done in the given company. The retention of the employees in the new company will a long term measure that the company will have to use in ensuring that when workforce is maintained things will be all right (Weber & Shlomo, 2012). Customers, suppliers and the business partners is a task that has to well-coordinated by the entire formed company only if it deems them necessary to it. If need be, the relationship of the partners with the new company ought to be well improved to ensure that, the company’s performance will be at the fore front.
Complete model considers the company’s short term and its performance over a long and the short period of time with the aim of acquiring the returns and stock over a short given period of time. When the transaction period has been announced, the company is required to give its stock analysis over that given time to ensure the model of acquisition is completed. When dealing with the completion of the long term windows, knowledge of what happened during the integration period has to be incorporated following that it is of great use to the acquisition and the merging program of the company. The success of the strategic move evident in the merging program is also analyzed by the market because the market will have a direct effect after the merging of the companies has been done (Vu, Shi & Hanby, 2009).
- Execution problems
The main execution problems that may fail the process of merger and acquisition are inclusive of; under communication, missing momentum, information issues that are addresses too late, unclear financial expectations, unclear strategic concept and the master plan that might be missing (Wang & Moini, 2012). The new organization structure might have high compromises that might interfere with the functioning of the company; thus becoming a problem that might result from the merging and acquisition a company. When a company has done the acquisition and merging the integration of the companies ought to be the shortest possible because of delayed loss may be highly incurred as a result. When problems are evident, the potential that is used in the building of the synergies is therefore not maximized and this also leads to the destruction of the share-holders value on the same company (Zollo & Meier, 2008). Momentum that is obtained early will tend to produce acquisitions that are successful; whereas, those which do not obtain early momentum will tend to suffer loss. The deal of acquiring the mergers depend on the execution that is put forth to ensure that the acquisition process is smoothened (Schief et al, 2013). Different cultures accompanied by different management styles will be prone to bring out.
- Integration imperatives
The integration imperatives explained by the Arthur are the urgency imperative and the execution imperative. The mergers that will prove to have a high progress will be the one that the market will easily trust to operate with for its growth and prosperity. The management with highly recognized actions will be at a high consideration by the company that is out to acquire the acquisition process (Arthur et al, 2003). The highest prioritized projects have to be won quickly to create a good impression to the investors that value is being created in the company that they want to acquire. There ought to be a very high urgency inclosing of underused facilities that may be the source of los to the company’s. Investors will be highly in need of knowing the value they will attain after attain the best out of the management.
- Execution plan with metrics
The extent of the execution plan has an important role to play in the success of the merger and acquisitions. For proper integration to take place, it is necessary to set expectations regarding the merger in order to determine whether the merger is a success or a failure. The management can decide to set a particular financial target, say 30% profits, to be realized after the merger of these companies has taken place. creating such a blue print for the organization enable the teams involved to work hard with the aim of ensuring that such a dream is realized. The execution plan should be developed such that it can easily show results as quickly as possible to demonstrate confidence in maintaining business momentum and continuity (Schraeder & Self, 2003). The execution plan should also focus on gaining and retaining more customers than the individual companies had. In this regard, a proper target of the customers can be set, which is above the individual companies, so that assessment can be made later concerning the number of new customers acquired.
- Execution plan to prevent M&A problems
Execution plan can adequately be used to prevent the problems identified in the post-merger integration. During the execution, proper communication should be enhances using the right channels and media in order to ensure that all issues are ironed out in good time (Wang & Moini, 2012). In addition, the execution plan needs to entail realistic and clear financial expectations to avoid failures due to unrealistic financial projections. The new organizational structure should also be arranged that it incorporate the managerial aspects of the merging companies and allow for proper communication flow within the organization. The organization should also create a master plan to help establish the momentum needed for the success of the organization. According to Zollo and Meier (2008), all the people involved in the execution plan should be fully committed and should be ready to follow the clear strategic concept set by the organization. All the execution plans should have set timelines in order to ensure that all the issues are addressed within good time.
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