Acquisition Strategy - Essay Example

Acquisition Strategy Acquisition Strategy Business acquisitions entail the process by which different companies within the same industry combine through the buying or selling of their entities. This enables them to foster regional growth without having to expand by opening new branches. This process of acquisition covers the three major aspects of business economics, which includes management, corporate finance and the corporate strategy. All these fields of business interact while conducting their business practices, whilst evaluating the need for an acquisition.

Acquisitions normally occur when a big company buys the business premises of a smaller company within the same industry. Upon acquisition, the two involved companies consolidate and integrate their management systems to suit the new state of affairs. After acquisition, the buyer company gains management control of the acquired firm. The economic proceedings obtained from the liquidation of the smaller company are distributed equitably among the shareholders of the acquired company. However, this process of acquisition is easier said than done.

Acquisition requires complicated procedures and many bureaucracies during the formalization period. This statement draws support from the findings that more than 50% of acquisitions over the last five decades have not been successful (Avcioglu, 2012 p.348). This mere fact warrants attention on capturing companies’ interests concerning acquisition strategies Acquisition strategy is a systematic mechanism employed during the acquisition exercise. Since business, acquisition is a complex process, a well-defined structure and mechanism is required to guide the exercise through its initiation to the execution stage of acquisition.

The structure needs to have clearly defined objectives and detailed plans of implementation, which focuses on meeting the acquisition goals. Acquisition procedures are characterized by numerous documentation processes meant to articulate the business information of the involved companies. This entails the evaluation of the companies’ financial records by the acquisition oversight committee. On the other hand, acquisition strategy mechanisms address not only the economic aspects of acquisition but also the cultural inclusion matters of the acquired company.

The acquirer has an obligation of harmonizing the terms and conditions relating to the human resource integration process of the two merging companies. In recent business history, most large companies have employed this tactic of mergers and acquisitions to enhance their business potential. Big multinational companies are considering expanding their regional coverage in terms of marketing. Since the process of expansion entails establishing new business premises within the target areas, most successful companies consider acquisition as the most suitable avenue of expanding their business.

The acquirers also acknowledge the benefits that come with acquisitions. These benefits include asset valuations of their company, effective access to resources, avoiding competition, and overcoming barriers to their mission pathways (Landgraf et al, 2011 p.617). Acquiring a business firm adjacent to an area of reliable resources like labor and raw materials enhances the success of the acquirer. In addition, consolidating of two competing companies in the same industry benefits the acquirer by eliminating the roadblocks that were created by the competitor.

Acquisitions increase the value of company assets through appreciation of resources like business premises and their human resources. Therefore, the acquirer in every industry aims at reaping the benefits that accompany desires. In this context, one of companies engaged in active acquisition process it the IBM. IBM has engaged itself in multiple successful acquisition exercises since its inception. Some of the most recent IBM acquisition includes the merging of IBM with Netezza and PSS Systems.

IBM acquired these two companies within the last two months. Both Netteza, which is a data company, and PSS Systems, a software company, have been fully integrated into IBM. IBM has actively employed its acquisition strategies in building their business pillars in the IT industry. The other major acquisition exercise in the IT industry was between Google and the Orion internet search engines in April 2006. In the petroleum industry, one of the major acquisitions was the merging of Royal Dutch Petroleum Company and Shell Trading Company (Landgraf et al, 2011 p.612). The royal Dutch company acquired Shell in 2007.

The acquisition exercise between these two companies was part of the Royal Dutch’s strategy of expanding its business practices through a large market of its products. In terms of enhancing their market positions, the acquisition of the software company PSS Systems and the data company Netezza by IBM places IBM in a better business position. The acquisition of these two companies will facilitates the development of the business analytic effort of IBM. Business analytics grows tremendously in the Information Technology industry.

The company’s financial manager projected that business analytics has the potential of generating $16 billion to IBM by the year 2015. IBM has an objective of exploiting the capabilities of business analytic software in responding effectively to the demands of the postmodern business platform. Technological advances increase the strength of a company. Therefore, IBM plans to enhance its business strength by articulating these software and data companies into their structure. These acquisitions will also place IBM in a better competitive position since both the competitors in the market, Netezza and PSS Systems are now part of them (McIvor et al, 2004 p.547). On the other hand, the merging of Shell Trading into Royal Dutch Company will increase the global market segment of the acquirer.

Shell Company dominated a large part of the petroleum industry around the globe. It was the largest competitor of Royal Dutch in the transport and Petroleum industry. In fact, Shell has sold franchises in more than 180 countries around the world. This means that the acquirer enjoys a larger petroleum market segment than before. The acquisition places Royal Dutch in a better economic position because of its expanded market coverage and the elimination of one of its greatest competitors in the market.

References Avcioglu, H. (2012).The Effectiveness of the Instructional Programs Based on Self-Management Strategies in Acquisition of Social Skills by the Children with Intellectual Disabilities. Journal of Educational Sciences: Theory & Practice, Vol. 12, (1), p345-351. Landgraf, S., Amado, I., Brucks, M., Krueger, F., Krebs, M., & Van der Meer, E. (2011). Inflexible information acquisition strategies mediate visuo-spatial reasoning in stabilized schizophrenia patients.y Available. World Journal of Biological Psychiatry, Vol. 12, (8), p608-619.

McIvor, R.T., McCloskey, A.G., Humphreys, P.K. & Maguire, L.P. (2004). Using a fuzzy approach to support financial analysis in the corporate acquisition process. Journal of Expert Systems with Applications, Vol. 27, (4), p533-547.