Decision on Whether to Fully or Partly Acquire a Firm
Essay by werunjogu • April 12, 2017 • Research Paper • 432 Words (2 Pages) • 936 Views
Decision on whether to fully or partly acquire a firm
Student’s Name
Institution
Background
Acquisition is the purchase of a firm by another in a bid to fully control the assets or the shares of the bought firm. Most companies opt for acquisition as way of boosting their growth strategy and increase their market segment since it easier to manage an already operational firm than to expand one’s own (Pablo, 1994). However, the decision to acquire another firm is often accompanied by many other considerations. A business must look into the viability of the firm to be acquired.
Problem Statement
In resorting for acquisition, a company faces major decisions that require cross scrutiny before a choice is made (Covaliu, 2001). The company has to decide whether to fully acquire the assets or the share of a firm or just to purchase part of the firm’s shares or assets.
Evaluation Consideration and Measures
The process of acquisition begins by evaluating a type of business that will make a good acquisition. The target business should have same or complementary market segments. The next involve due diligence analysis. This entails scrutinizing the financial situation of the business and other relevant conditions of the business. Next, financial terms are agreed upon then acquisition process begins. The acquiring business has to evaluate the personnel, overlapping processes, and products.
Alternatives
In process of deciding whether to acquire another firm, an enterprise has various alternatives which include merger, fresh expansion, buying of the firm’s assets or share either fully or partly. Merger is stricter since it involves dissolving the independent identity of the two firms and blending into one enterprise. Fresh expansion may also be costly since it requires immense resources to gain a new market segment. Buying part of or the whole of a firm’s share or assets gives the acquiring firm full ownership of the bought section (Pablo, 1994).
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