2: My Firm's Acquisition - Assignment Example

This paper will attempt to present multiple issues, considerations and strategies for acquiring a company. In this respect, at first a brief overview of background will be presented followed by discussions on acquisition process. Background of the Situation The acquirer company is one of the market leaders in UK furniture industry. Due to presence of other market leaders, the competition is very high, and each competitor is trying to gain upper hand position in market by gaining competitive advantages.

The organic growth is preferable in any industry but it is very slow process which is not very helpful in such competitive market. Therefore, the acquirer company is now looking for market expansion in Asian countries like China. In China, market demand is growing at a higher rate. The UK-based acquirer company has sufficient technical expertise and resources to enter in Chinese market and, hence, it has targeted a potential Chinese furniture company for acquisition. The acquirer company will analyze the Chinese market as well as the acquiree company before acquisition.

As per a report by the company, after the acquisition, the company’s size, salary, bonus and stock options will expect to double by next year. However, the CEO and other mangers are aware of the fact that 70% of M&A fails (Kusstatscher and Cooper, 2005, p.1), and hence, the company is planning to identify different issues underlying with M&A to reduce the chances of acquisition failure. Hubbard has developed a model for acquisition showing necessary phases in pre-acquisition. Figure 1: Process of Pre-acquisition Planning (Source: Hubbard, 2001, p.49) Issues in Acquisition Institution-based issues The acquirer company is an UK-based company; whereas, the acquiree company is from China.

Chinese culture and UK culture are very different from each other and hence, their business policies and organization culture differ considerably. Therefore, the acquirer company is expected to face a number of institution-based issues. The primary issue is that the acquirer company will face difficulties in understating cultural diversity in China. In this respect, Geert Hoftstede’s cultural dimension model is very helpful to understand the basics of Chinese organizational culture. The following model shows the difference between the Chinese and UK culture.

Figure 2: UK and Chinese Cultural Dimension (Source: Geert Hofstede-itim, 2009) As per the above figure, Hofstede has identified five dimensions of culture i.e. power distance index (PDI), individualism (IDV), masculinity (MAS), uncertainty avoidance index (UAI) and long-term orientation (LTO). Besides, there are other macro-economic factors that must be analyzed by the acquirer company. For example, Chinese Government imposes greater restrictions on foreign companies to avoid domestic market exploitation.

For example, the Chinese government is criticized for its trade policies (Business Intelligence, 2008). On the other hand, Chinese market is one of the largest emerging markets with increasing consumer demand that attracts significant