Mergers, Acquisitions, And Downsizing
Difference between a merger, acquisition and a downsizing
All the three are management strategies dealing with the competitiveness of the companies in subject (Cassiman, 2006). The choice for either of the three depends on the interest of the subject company in their relationship with the other companies in the industry. The differences arise from the various components such as their concepts, size, application and the condition for their occurrence.
The concepts
Merger is a cooperate strategy involving the combination of many companies whereby the subject companies intend to expand their business operations. Acquisition involves the combination of the companies with only one company having most interest in the newly established company. Downsizing always applies to both the acquisition and merger whereby the newly established company realizes that the new operating structure is costly: consequently triggering the need to downscale the cost (Shook & Roth, 2011). Downsizing often occurs after mergers or acquisition.
2. The conditions
A merger occurs when the deal between the subject companies ends in a friendly manner with the companies having equal contribution to the resulting new companies; the companies will have to share the profits equally. The merging companies cease to exist on their own, and the result of the merger is one new company under a single management. The companies come in with their different strategies, which they share with each other; consequently, making the resulting company more strong compared to their competitors in the market.
This concept differs with that of acquisition whereby one company will be taking over another company. Taking over occurs in an unfriendly manner. The acquiring company always has the power over the whole combination since they will be using their rules in the operation of the business. All the profits go to the acquiring company implying that the acquired company will cease to exist in the market.
3. The...
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