Change in a Telecommunication Company Called London Networking Solutions - Assignment Example

A REPORT ON ORGANISATION OF INNOVATION AND CHANGE IN A TELECOMMUNICATION COMPANY CALLED LONDON NETWORKING SOLUTIONS. THE COMPANY INTERESTED IN THEAQUISITION London Networking Solutions is a Telecommunication company situated in the City of London. It's a small scale business founded to offer network installations in the ever growing IT market. This company has great target of expanding and with time, outdo all other information technology companies. One of its key strategies is to emphasis on acquisitions of other similar companies, so that it can monopolize the market. As the main market driver then, the company will enjoy lots of privileges. These will mean more profit to London Networking Solutions. (This is a brief introduction to a ghost company, which is not in existence in reality. It's just a creation to answer the question.) London Networking Solutions management approached MaxiProfit consultancy firm for advice. This was to help them advance towards reaching their main goal, which is to monopolize the market. THE CONSULTANCY FIRM MaxiProfit is a management consultancy firm. Management consulting simply refers to both the industry, and the practice of, helping organizations to basically improve their performance, primarily through the analysis of existing business problems and development of plans for improvement. Organizations often hire the services of management consultants. This is because the pursuit of expansion is vigorous and extensive. Experts in the business fields are therefore required for a number of reasons, including, for example, to gain external, and presumably more objective advice and recommendations, which may help solve the problem at hand or for long term plans. Another is to gain access to the consultants' specialized expertise, where the hiring of permanent employees is not required. Because of the exposure of consultants and their relationships with numerous organizations, consultancies are also said to be aware of industry 'best practices,' this is as noted by Sam Palmisano of IBM (2007) although the transferability of such practices from one organization to another is the subject of debate. Upon successful negotiation of a deal, Consultancies may also provide organizational change management assistance, development of coaching skills to the lead staff of the Host Company, technology implementation, strategy development, and operational improvement services. Management consultants generally bring their own, wealth of methodology and frameworks to guide the identification of problems, and to serve as the basis for recommendations for more effective or efficient ways of performing business tasks. Planning is basically important, so as to end up with a workable procedure. This will help save on many things especially financial. Small and medium enterprises Companies always enter into acquisitions for the main reason of assuming the market monopoly. Ancient philosophers once noted that it's better to expand to a giant. One Socrates further created a light moment that one needs not worry of growing slowly but rather should worry of standing still. Growth by acquisition is a thoroughly tried and trusted strategy. This system allows one to move into new markets or increase their existing market share at much more rapid rate than would be likely through the commonly used organic expansion. This is as discovered by Anita Roddick of Beware management consultants (the learned man 2007). Companies hit the mergers acquisitions trail for a host of reasons. Among those noted also include: 1. Taking the threats of main competitors out of the market. For London Networking Solutions the main competitors are all the IT firms that perform network installations within and without the great UK. IBM and SAGEM, being some of them. 2. Another reason could be to Scale up in a particular sector. These sectors include servicing of the installed networks, offering of spare parts and consultancy as far as IT is concerned. These are the main interests of London Networks. 3. Diversifying into new markets is a very key point towards forging ahead the acquisitions. By doing acquisitions, London Networks will own companies that seriously dominate other markets. An example is in Kenya. By purchasing Soliton telmec, London Networks will gain full market control of East and Central Africa. This in turn will bring in a whooping market monopoly and hence great profits. 4. Buying in experienced staff is another advantage that a company realizes when it takes control of another through acquisitions. This is because the deal is made by the company board of directors without the employees getting involved. The employees are actually part of the business assets that are transferred in this new ownership plan. 5. London Network Solutions also benefits by acquiring a new technology from the company it buys. These new technology include GSM networks, optical installation KIT among others in the IT industry. This gives the buying company a diverse wealth of experience, and opens it to greater markets. 6. Reversing into a business that is performing better than yours is another advantage. In the recent past, Microsoft created a merger with Yahoo, with a main mission of recovering its market strength. This also had a hidden though very obvious secret: to be so powerful for Google. This has actually motivated many companies into pursuing acquisitions. The objective will in turn dictate the choice of acquisition target and it's vital that one seriously focus on buying companies that will help you achieve your goals. One should never acquire the first halfway suitable business that is available for purchase. It's important to Satisfy oneself that by acquiring it a company will further their strategic aims as the above summary indicates. Many preparations come along with acquisitions. For example, its of paramount importance to think about how one can minimize administration costs once they've made their acquisition. Even if one buys a business that is operating in a different town or region, one should be able to find savings by sharing back office functions such as HR and invoice processing. In the acquisitions market these types of savings are dubbed synergies. SMALL AND MEDIAM ENTEPRISE (SME) The abbreviation SME is very common. It occurs commonly in the European Union and in international organizations, with examples as the World Bank, the United Nations and the WTO. In most economies in the world, smaller enterprises are much greater in number. In the EU, SMEs comprise the largest percentage with an approximation of 99% of all firms. Such ventures employ between them about 65 million people. In many sectors, SMEs are also responsible for driving innovation and competition. The definition of small and medium enterprises has remained ambiguous to many unions. For this reason they face particular difficulties which the EU and national legislation try to redress by granting various advantages to SMEs. A legally secure and user-friendly definition is necessary in order to avoid distortions in the Single Market. The revision furthermore ensures that enterprises which are part of a larger grouping and could therefore benefit from a stronger economic backing than genuine SMEs, do not benefit from SME support schemes at their expense. The increase of the financial ceilings is designed to take into account subsequent price and productivity increases since 1996, however the headcount ceilings remain fixed. This gives categories to the SME firms as given by an article in trade and industry. This is expounded as below: Balance sheet total medium-sized < 250 50 million 43 million small < 50 10 million 10 million micro < 10 2 million 2 million ORGANISATION OF THE ACQUISITION mergers and acquisitions always eat management time. Many acquisitions fail because the management teams find it very difficult to integrate two companies with possibly very different systems and cultures. This is quite saddening isn't it However, it is important to think carefully about this in advance and formulate a plan that should be implemented within a few months. The experience of buying once first business can be a very complex and a really challenging process to undertake. However, it has advantages. Although it is a risk, owning a business can also be a very rewarding means of controlling once own destiny and hence accumulate wealth. Management consultants come in handy to assist one throughout the entire buying process with the goal of making the acquisition transition smooth as possible. The following steps are undertaken in order to successfully buy a business: A. Personal assessment. Company should first determine whether it has the skills and financial capability to successfully own and operate the firm to be acquired... Financial capability is harder to determine but a conservative rule of thumb is that one should have an amount available in liquid assets (those which can be readily turned into cash) for a down payment for the business they are interested in this capital should be at least equal to the income you expect to earn from the business to be acquire. This is to ensure that one doesn't enter into a less profitable deal. B. Development and implementation of a plan The English motivation speakers have a common slogan for success: "that if you fail to plan, then you are planning to fail." The same is true of buying a business. One should prepare a business Profile which outlines the criteria to be established for the business to be acquired. The profile should include the following information: the management educational and professional background, their strengths and weaknesses, outside interests, the types of businesses they would like to acquire the geographical preferences, the desired timeframe to complete the process (at least six month is allowed). Another aspect of paramount importance is the financial status of the buying company. This entails the amount of money they are willing to invest and the income they wish to make from the business you acquire. Its important to Be reasonable in all aspects of the plan.. It is unlikely that one will find a business that meets all of their requirements. Flexibility is a key virtue - it is a skill one will need not only in buying a business, but also in operating it. The company should establish a team of professionals to assist in their acquisition search. The current advisors may not be versed in the intricacies of buying a business. Some key professionals like attorney, accountant and lender who are knowledgeable in the acquisition process are a must. Several marketing ideas to consider are 1) Networking with existing business contacts, 2) Sending the company profile to the professional community (transactional attorneys, accountants, bankers, trade associations and professional groups like the chamber of commerce, 3) Mailing inquiries to business owners in the industries of interest to the company. 4) Searching the internet and local newspapers for businesses currently on the market, 5) Contacting Business Intermediaries who handle the size and type of business of interest C. obtaining a reputable business intermediary It is important to interview many different business intermediaries and choose several one is comfortable working with. Bring a list of questions as well as once business Profile to the initial meeting. Other information to discover are how long the firm has been in business, how long the it has been a business intermediary, what their background is, if they have handled the sale of a business similar to your criteria, and how many opportunities they sell each year Once comfortable with the firm and the individual intermediary, share your Profile with them and explain your acquisition criteria. D. Confidentiality This a key area to consider since almost every seller requires confidentiality as they do not want their employees, customers or suppliers to know they are selling their business until after a transaction has been completed. Buyers should be just as concerned about maintaining confidentiality to ensure a smooth transition during and after the acquisition. It is amazing to realize that you are being sold out as an employee! It is important to remember that buyers need trained, knowledgeable and motivated employees just as much as those employees need a secure working environment and job satisfaction. A breach of confidentiality can have a major negative impact on a business which can result into great losses. E. Evaluation of prospective business opportunities. Once possible acquisitions have been identified one should ask to receive a Confidential Business Review (or CBR, much like a prospectus) which should include a description of the business, a list of the major assets, information about the real estate lease and at least three years of historical financial information including tax returns. "If the business meets your key criteria, analyze all the information provided and prepare a list of questions about the business" denotes the learned man (2007) When studying the financial statements of a privately held business, while in pursuit for a business to buy it is important to remember that the goal of every business owner is to minimize their income for tax purposes. A buyer should look to uncover the true earning power of a business by adjusting, or adding back, expenses which would the buyer would not incur after the acquisition this therefore calls for thorough analysis of the available opportunities. This valuation is always done with the help of a consultancy firm like MaxiPrifit in this context. F. Buyer and seller panel. Prepared list of questions or topics to be covered during the meeting is mandatory. Its important to maintain calm Be relaxed and start the meeting by giving the seller a brief description of you work experience which will then lead into a discussion of the business and how it might fit your needs. One can drop the deal if not satisfied with the offer. This is mainly to avoid falling into losses. G. Determining the value of the business The three basic ways to value a business can be used. First is Replacement Cost which includes not only the cost to replace the assets but also the cost in working capital to build a similar business from scratch in order to reach the current level of profitability. Another method is the Income Approach which values the business based a return on investment analysis or the ability of a business to generate earnings. The Third is the Market Approach. Certain types of businesses are in higher demand than others and may command a premium in the marketplace. Getting the accurate market value obviously helps the buyer to know what price margins to expect during the acquisition. H. Finalizing the acquisition process Its important to watch out at this time. This is the most critical of all steps in the entire process. A strong team of advisors and a knowledgeable Business Intermediary are paramount. this is to ensure a successful outcome, but one must take a proactive approach to ensure that all the necessary steps are completed in a timely manner. Once the buyer and seller signed a purchaser agreement, it takes about thirty days to complete the transaction and there are many steps that must be completed before a closing can take place. These steps include forming a business entity for the acquisition, performing due diligence to verify the accuracy of the information provided by the seller, assuming the real estate lease, and transferring any special licenses and taking an accurate inventory immediately prior to closing I. The transition process The seller's time is best spent in introductions to the employees, customers and suppliers and teaching you the operation of the business. The buyer and the seller should mutually prepare an outline of the items you need to learn during the transition period. Make good use of every second you have with the seller - they have built a successful business and it is your job to learn how and why. Last, but not least, don't start making immediate changes to a successful business - there's a likely to lose key employees or customers. Time should be taken to learn the business then gradually implement changes one feels will make it better. CONCLUSION Innovation is key to growth. Many forms of this actually exist. Acquisition as one of them is outlined above. The short term strategies to be implemented are mainly to ensure continuity. These include retaining all the staff to avoid loss of some would be trustworthy officials. Gradual exposure is also important to help retain the very valued clients. Clients need to be contacted and reassured as soon as possible. It is important to make sure that there is no disruption to their overall service levels and that the relationship will continue to grow. Long term planned changes should now be underway. These include combining accounts and IT systems. "This is also a good time to ensure that there's plenty of interaction between old and new employees. Joint projects should be launched, and new clients should be experiencing the benefits of dealing with a larger company." (The learned man, 2007). The board of directors for both companies should continue in meetings until all the acquisitions is complete. When all these are done a smooth transition takes place without loss of resources. All things are possible. All it takes is a strong will, attitude, energy and resources. REFERENCE Acquisitions in UK (2008).The learned man. Last retrieved from the World Wide Web on 27th April 2008 http://www.thelearnedman.com/elearning_business_aquisition/index.html Read More