Issue in acquisition - Term Paper Example

Finance and Accounting Topic: issue in acquisition Table of Contents Finance and Accounting Topic: issue in acquisition Tableof Contents 2 Introduction 3 Merger of Tata Steel and Corus 3 Merger of Glaxo and Smithkline 4 References 6 Introduction The age of competition has largely led to change in the business dynamics and functioning of business organizations. Companies are using all possible strategies to gain market share and thwart the competition. In this aspect one of the main strategies includes the route of merger and acquisition.

The opening up of global economies has further given a boost to this strategy that not only helps companies gain a considerable market share but to also to gain consolidation in the market space. However, this strategy has a large share of failures mainly due to differences within the two organizations (Rosner & Shropshire, 2010, p.211-213). The present study would analyze the issues in the merger of two famous organizations so as to gain a better understanding of the issue including an analysis of the possible solutions to such issues.

Merger of Tata Steel and Corus Tata Steel is considered to be the pioneer of the steel industry in India and has a huge scale of operations. The present case discusses about the merger of Tata Steel with Corus Group. Corus on the other hand is a UK based steel company whose business and scope of operations are much larger than that of Tata Steel. The hundred percent acquisitions of Corus were carried out with a deal worth 6 billion US dollars and have pushed Tata Steel to one of the largest players in the global steel industry.

The process of acquisition was however with Tata Steel facing issues with regards to more competitive bidding by CSN group. The CSN group offered a bid price of 475 pence per share that was higher than that quoted by Tata Steel. In addition to this Tata Steel also faced cultural integration issues. The main issue however was settled by an efficient financial strategy implemented by Tata Steel. Tata Steel launched a competitive offer of an even higher price than CSN to win the bid for Corus. CSN again launched a higher bid for the company that was again lost out when Tata Steel offered a price of 608 pence that was about 68 percent higher than the average prices of shares of Corus.

This was largely financed though external debt and post acquisition the shares of Tata Steel plummeted by about 10 percent. However, the aspect of consolidation and increased scope and scale of operations has enhanced the image of the company and increased its market capitalization. In order to counter cultural issues the board of the newly acquired entity had an efficient mix of local as well as Indian officials so as to take care of cultural issues and that ensured a smooth transition of management control.

This case clearly highlights that an effective merger or acquisition requires comprehensive and considerable far sightedness as well as careful management in order to ensure success and sustainability (XIMB, n.d., p 1-15). Merger of Glaxo and Smithkline One of the most famous mergers in present business environment is that of the merger between Glaxo and Smithkline to create the largest pharmaceutical company in the world. Both these companies were based in UK and shred common culture. The merger of the two organizations led to the creation of the largest pharmaceutical company of the world.

However in spite of cultural and other similarities the merger ran into rough weather following the issues raised by the US antitrust corporation. The US authorities felt that this would take away the balance of competition to the side of Europe. The US authorities believed it was against their competitive polices and the aspect would not be fair. In this regard the merger faced tough times as clearances were delayed by the authorities resulting in confusion, business loss as well as large discontentment and confusion among the employees and other stakeholders.

The company faced by these issues faced loss in business as US was the largest market for most of their products. The positioning as well as financial standings of the company took a major hit following the issue. However Glaxo Smithkline addressed the issue by shifting their headquarters to the USA and maintains its corporate office at Europe. In this way the American authorities were satisfied and gave the necessary clearances so as to start operations while the merged entity could continue its operations unhindered as its corporate office was located at Europe.

This case again illustrates the aspect of careful planning and also how effective management can lead to successful mergers and acquisitions (Ullah et.al. n.d., p.2-11). References Rosner, S. & Shropshire, K.L. (2010). The Business of Sports. Jones & Bartlett Publishers, 2010. Ullah et.al. (No date). Does Merger Deliver Value? A Case of Glaxo Smith Kline Merger. Retrieved January 07, 2012 from http://www.wbiconpro.com/10%5B1%5D.%20Subhan.pdf. XIMB. (No date). TATA & CORUS: A Case of Acquisition.

Retrieved January 07, 2012 from http://www1.ximb.ac.in/users/fac/Amar/AmarNayak.nsf/dd5cab6801f1723585256474005327c8/060eac2cc3faa40265256c78003ff893/$FILE/Tata%20Corus.pdf.