Merger, Acquisition, and International Strategies - Case Study Example

Business College: Merger, Acquisition and International Strategies Merger and acquisition refers to mechanisms by which companies combine in order to promote their business interests to pursue a common market. A merger refers to the mechanisms by which a two or more companies consolidate their resources to form a new entity while acquisition refers to a situation where one company purchases another without necessarily establishing a new company. Merger and acquisition have for long been exploited as an avenue for business growth and development and especially during takeoff to international market. In the US, mergers and acquisitions have been exploited by many public corporations with the goal of pursuing a wider business scope and extension of business operations. Although Merger and Acquisitions have numerous advantages, the fact that they are faced with numerous challenges and risks is indisputable. This essay will compare a company that has no history of merger and another that has pursued international market after a merger relationship. Economists have delved into market research in order to explain the reason why some companies choose to enter into merges or opt to purchase other companies while others remain adamant to do so. According to Swam and Casy (2012), merger and acquisition involves the transfer of all assets and liabilities to the new company that is formed or to the purchasing company. From this statement, it is clear that the process involves the inheritance of all qualities of the companies so acquired, which points to the need for caution when considering the option. There has been a lot of emphasis on the many risks that a company must be prepared to encounter while considering either a merger or an acquisition. Therefore, the motives of acquiring, being acquired or even merging with another company must be clear and worth during the course of such a transition. In the US, the law provides regulations to govern mergers and acquisition in order to protect the welfare of the shareholders from the risk of this process. Choose two (2) public corporations in an industry with which you are familiar – one (1) that has acquired another company and operates internationally and one (1) that does not have a history of mergers and acquisitions and operates solely within the U.S Although numerous companies in US have combined in a merger and acquisition process, there is evidence that some companies have remained reluctant to this kind of business strategy. For instance, Bright House Networks has exhibited no history of combining its assets with any other telecommunication company. Bright House networks has grown to be one of the largest telecommunication company owning and operating cable systems in major US towns such as Florida, Michigan and California. The company has limited its geographic scope within the US despite the emphasis that has been placed on the need to engage in international business. On the other hand, SBC communications has shown an active history on merger before reformation to the well-known Multinational Corporation, AT&T. SBC acquired the Ameritech company in 1999 which by then was the largest cellular mobile phone service provider in the US. Later in 2006, the same company moved a step ahead and acquired AT&T company and inherited its corporate name (Kumar, 2012); currently, AT&T Corporation has infiltrated into the international market providing data, voice and wireless services. The SBC Telecommunication Company had the interest of expanding its wireless services given that the demand in the US was growing and the market was becoming more favorable for investment. The idea of the SBC was to expand its geographical coverage by combining its business efforts with Ameritech Company which had a good ground in the market. The two companies combined their wireless technologies, a move that enables them to move expand their service to 13 more countries in the US. Another dream that SBC Company was pursuing through this merger action was to extend its services into the international market. The common interest that favored the initiation of this merger is the fact that the two companies were foreseeing the competition in the telecommunication industry that was just about to explode with new market entrants. Kumar regarded this as a ‘logical and necessary response’ based on the ground that the two companies had a great a vision to transform wireless technology to satisfy the global standard mark. Nevertheless, the merger did not fall short of challenges just like any other merger. First, the two companies had to synchronize their transmission technologies in order to operate within a common platform. The Ameritech Company, which employed code division multi-access technology for broadcast purposes, had to conform to the time division multi-access technology that SBC used. This was a major and necessary transformation that had significant economic impacts on the two companies on the newly formed business. Despite this challenge, the company was able to increase its customer number to 18 million individuals and at the same time reach out to the international market (Kumar, 2012). 1. For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion. The merger of SBC with AT&T was triggered by an ambitious strategy of SBC to provide more integrated services that would include both communication and entertainment for its growing customer population, another idea of the SBC was to reduce redundant sales that had a great impact on the company’s net present value. In this view, SBC forecasted an increment of over 15 billion dollars net present value if the FCC would confirm this merger in time. The SBC Communication Company seems to exploit merger actions to form a ground to exploit the market in a more effective manner as a way of optimizing their income. At the same time, the company has the intention of becoming a worldwide service provider which is the ultimate goal of every business in the current the globalized world. Economists have pointed out that mergers are the best avenue for business growth, especially if the motives and the strategies are grounded on principles of business development. The idea of SBC to merge with the best companies in the telecommunications sector and its ability to achieve its strategies to expand business globally can be termed can be termed as the reason behind the privilege that AT&T enjoys now. Consequently, the SBC strategy to combine with other companies can be termed as the wisest idea that the company would have made. 2. For the corporation that has not been involved in any mergers or acquisitions, identify one (1) company that would be a profitable candidate for the corporation to acquire or merge with and explain why this company would be a profitable target. On the other hand, the Bright House company has remained reluctant to engage either in a merger or even to acquire, or be acquired by another company. Bright House Network has ventured into domestic market by and has been rated high among the numerous companies that own and operate cable systems in the U.S. Although this company has enjoyed a lot of financial returns from the telecommunication sector, it is indisputable that the company has been able to span its services into a wide geographical scope like the AT&T Company. While Bright House enjoys a domestic reputation, AT&T Company has maintained dominance within both the domestic and international markets. According to Singh (2011), one of the barriers that hinder small business companies from expanding is the lack of adequate capital to invest internationally. This economist has suggested that the only way to reach out for the international market is to engage in merger actions in order to garner enough capital to hit the road for expansion. In the globalize world, the success of a business can only be defined by its ability to penetrate the international market through technology driven strategies. In this view, it would be a wise decision for the Bright House company to consider combining with another business company in order to be able to optimize its industrial productivity. However, economists have warned that while considering merge or acquisition it is wise to wise to engage in a risk analysis of the company you consider a potential partner. Carney (2000) suggests that a viable union originates from companies that have consistently outstanding economic backgrounds in the last five years prior to the union. This will guarantee the union success given that the two companies have fewer liabilities as compared to their assets. For Bright House Networks Company, the best company to merge with or acquire would be the Verizon wireless company that provides 4G LTE network in the United States. Verizon wireless has grown to be the largest telecommunication company in US after providing high end wireless technology which the most satisfying in this state (SEC, 2012). In addition, the two companies would be complementary given that they provide the same services using different technologies. Their combined efforts would provide a wide variety of services and to a greater population with higher efficiency. This move would be of great significance to Bright House networks as the synergy expected from such a union would propel this company to the external market. Research has shown that complementary business entities provide the best ground for services diversification. 3. For the corporation that operates internationally, briefly evaluate its international business-level strategy and international corporate-level strategy and make recommendations for improvement. The success of AT&T companies both in US and internationally emanates from its effective international business level strategy and corporate-level strategy; this company has integrated corporate level planning and corporate level decision making tools to infiltrate deeply into the global market. The main objective at the corporate level is to become an international business icon by the provision of quality and cost efficient services. In customer value-based approach of marketing, the main prospect of a business should be to know and to satisfy the tastes of its customers. To accomplish this, AT&T has maintained a high end technology in order to provide quality services to its customers within their networks. At the business level, the company has embarked on effective strategies to edge out competition against other telecommunication service providers by providing achieving comparatively low costs and ensuring all time their services are available all the time to the customers. In the US, the company embarked on a strategy that was meant to provide its subscribers with services ‘anywhere and anyhow”. This idea points with the intention of the company to provide high quality of service and in all regions of the US. In addition, effective management and high organizational profile have remained their priority in the international market (Bruton & Ahlstrom, 2009), however, it would be recommendable for AT&T Company to expand its business scope by including more services within their corporate framework. At the business level, it would be important to integrate service differentiation and further cost reduction in order to reduce its business rivals in the data transmission industry. In brief, effective business and corporate level strategies are the drivers of this telecommunications giant. For the corporation that does not operate internationally, propose one business-level strategy and one corporate-level strategy that you would suggest the corporation consider. Justify your proposals. For Bright House Networks Company to excel, it would be crucial to adopt both corporate and business level strategies like AT&T Company has done. At the corporate level, Bright House should consider establishing a multi-business trade in the international market in order to diversify their range of services. For instance, it would be wise to start wireless transmission technology in order to avoid the risk of losing their customers due to existence of a market that demands remote access of data. At the business level, this company should consider replacing their co-axial cables with optic fiber to achieve transmission of higher quantities of data required by the increasing demand for data. These strategies will assist Bright House networks to remain at a competitive edge as a way of maintaining high profits, which is the end goal of both corporate and business level strategies (Finlay, 2000). However, the issue of merge and acquisition in the US has been faced currently with a number of challenges that have seen many companies retract from this business strategy. Statistical analysis proves that there has been a great reduction in the number of merger and acquisitions in the US in the year 2012 (Casy & Swamm, 2012). One of the challenges in the US included the cumbersome process that is accompanied by this kind of business union. The government has instituted measures that are aimed at reducing the risks associated with these business strategies. For instance there is as high fiduciary responsibility for the companies whereby the companies have the corporate bodies of the companies are required to safeguard their shareholders. In particular, the reversed mergers have been hit with blow since the regulations are strict when such unions involve a private organization and a public one. The main concern has been that such merge actions are more vulnerable to the risk of failure than any other. In addition, there has been discrimination against the third world countries on the ground that they pose a great threat for merger and acquisition programs due to the high instances of fraud evident in these countries. Therefore, these programs have been limited to the developed countries and the developing countries have remained at the consumer end. However, there is still a great emphasis on the need for companies to team up together to expand their business in order to meet the demands of the society in a more effective manner. In conclusion, Mergers and acquisitions are significant strategies for any company that wishes to expand its business into a wider geographic scope. Globalization has become a trigger for such unions as the pressure to expand business emanates from the international market. Mergers and acquisitions allow companies to combine their assets in an effort to roll out their services to the entire world. If well planned, mergers become the best platform for quality and quantity service delivery in terms of customer satisfaction and customer numbers. However, it is indisputable that the challenges associated with such kind of business transformations are inevitable. The planning stage therefore involves estimations of the risks and calculation of the cost of transformation before the entire operation. Companies such as AT&T have changed from domestic companies to international giants through merger and acquisition, companies that have indicated a low esteem of such business efforts have limited their business scope to the domestic level. Therefore, Merges and acquisition can be regarded as the vehicles that drive business to international market. References Bruton, G. and Ahlstrom, D., (2009). International management: Strategy, Culture in the Emerging World. Asia: engage learning. Carney, W., (2000). Mergers and Acquisitions. New York: Foundation Press. Casy, E. and Swamm, W., (2012). Current Trends in US merger and acquisitions. Retrieved from < www.nixonpeabody.com/files/151492_Africa _Alert_08_2_2012.pdf> Finlay, P., (2000). Strategic Management: An introduction to Business and Corporate Strategy. UK: Pearson Education Kumar, R., (2012). Mega Mergers and Acquisitions: Case Studies from Key Industries. USA: Palgrave Macmillan. Securities Exchange Commission (SEC), (2012). Investor Bulletin: Reverse Mergers. Retrieved from :< www.sec.gov/investor/alerts/reversemergers.pdf> Singh, N., (2011). Localization strategies for Global E-Business. Cambridge: Cambridge University Press. Read More