What are the major advantages and disadvantages of mergers and acquisitions?These are 6 discussion quest is that needs responses to EACH question six in total. APA format atleast one paragraph in length cite in paragraph wherever needed and no cover sheet needed. This is a MBA Level course so grammar and reference page needed.

1.e term acquisition is “the incorporation of one firm into another through purchase” (p.193). With acquisitions one organization buys another it can be either through stock purchases, cash, or the issuance of debt. The term mergers is “the combining of two or more firms into one new legal entity” (p.193). Mergers is the combination or consolidation of two firms to form their new business. Mergers tend to be more of the rare instances and have to have a transactions among the two firms on a total equal basis. Even though there are some differences between both they are basically the same. Some advantages of mergers and acquisitions “are that it can help an organization expand its products and offerings and services, it can provide the opportunity for firms to attain the three bases of synergy-leveraging core competencies, sharing activities, and building market power, they can also lead to consolidation within an industry and can force other players to merge, and corporations can also enter into new market segments by the way of acquisitions” (p.194-195). Even though acquisitions and mergers have some good advantages they also have some limitations. The first limitation is , “the takeover premium that is paid can be high” (p.195). An interesting fact is that with an company that is taking over two of three times the stock price falls once the deal is made public. Therefore, it is in a companies best interest to not pay a higher premium over the acquiring company’s stock price due to it being a poor strategy. The second limitation, is “competing firms often can imitate any advantages realized or copy synergies that result from the M&A. The third disadvantage is a managers credibility and ego can sometimes get in the way of sound business decisions” (p.196).

In many cases if the M&A doesn’t get performed the way its supposed to, it causes the managers overall reputation to turn bad. Leading them to want to protect their reputation and credibility by putting more money, or pushing their commitment, further into a doomed operation (p.196). Most of the time when mergers or acquisitions head south. The morale of the employees drop, and synergies fail to materialize. Those key employees that are in the organization are quitting. Most of the time the biggest problems of these are their is a culture clash. In a culture clash, the companies fundamental ways of working are so different and so easily interpreted that people feel frustrated and anxious, leading to demoralization and defections. There are productivity flags, and the company has a hard time finding fixes. Most of the time the acquirers have these well developed toolkits for managing the financial and operational aspects of the deal’ they track the overall results, and hold who needs held accountable for hitting their targets, but integrating two disparate cultures, are both difficult to measure and almost impossible to manage directly. Resulting in few organizations applying the same kind of rigor to managing and steering cultural integration that they apply to the regular synergy. At this point no one is accountable, senior leader often find themselves in non favorable positions of watching these problems unfold (p.194-200).

A current merger that has happened that many of us individuals know about is the merger of Oconee Medical with Greenville Health. The merger is to help ensure that high quality medical care continues to be provided in our area. The boards of directors of both companies approved a 32 page binding agreement by which OMC becomes a part of the GHS system though a lease of the Seneca hospital. The first lease will run for 50 yrs. with options to renew for two additional 25 year terms. OMH was the eighth hospital to enter into the GHS network. This merger was supposed to make a positive impact on the health of the communities we serve by improving access, quality and value. The two systems say they share the same goals of making their communities healthier, not just treating the sick. OMH was reported to have said the merger itself was the best way to ensure that the hospital was able to survive (Oconee Medical Approves Merger with Greenville Health, n.d.).

References

Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. (2014). Stategic management: Creating competitive advantages. (7th ed.). New York: McGraw-Hill/Irwin.

Oconee Medical approves merger with Greenville Health. (n.d.). Retrieved January 20, 2016, from http://www.independentmail.com/news/oconee-medical-approves-merger-with-greenville-health-ep-473750440-345888902.html

2.What are the major advantages and disadvantages of mergers and acquisitions?

Advantages:

Acquire a firm’s assets and core competencies
Allows a firm a chance to diversify into new markets or products
A firm can quickly expand
Consolidation of an industry (Dess, Lumpkin, Eisner, & McNamara, 2014, pp. 193-195)

Disadvantages:

The takeover premium is often very high because many times the stock prices will fall.
Competitors can copy the advantages or synergies that the newly merged firms create.
Can be problems with creditability of business decisions
Cultural differences between the two firms (Dess et al., 2014, pp. 195-196)

Why is it so difficult to integrate firms together after a merger or acquisition? Share a case of merger from the news or online sources and post a comment on the consequences of such strategy.

In my reading this week, I keep coming across culture as one of the main reasons that mergers or acquisitions fail. LaPlante (2006) wrote, “A merger can fail for any number of reasons…but cultural differences are increasingly thought to be a major cause of post-merger dysfunction”. One example of an organization that failed due to culture was Compaq computers and Digital Equipment Corp. Compaq had an organizational culture that was based on “high-volume, fast-to-market strategic focus” (LaPlante, 2006). Digital Equipment Corp. had a longer sales cycle and elaborate processes in place. As a result, there were significant challenges in this merger and Dell overtook Compaq as the number one computer maker (LaPlante, 2006). Culture is the beliefs, values, and practices of an organization. In a merger, planning the new culture of the joint organization is critical to the success of the merger or acquisition. An organization needs to assess carefully the demographics of “growth rates of the firms, the selectivity of the hiring processes, the type and extent of socialization that occurs once employees are members of the organization, the rates of employee turnover, and the degree of alienation felt by employees” (LaPlante, 2006). Not all employees will fit the new culture and changes may need to be made. Additionally, it is critical that all employees are instilled with the new culture because this will remove a lot of the pressure to try and meld the old together.

References

Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. (2014). Strategic management: Creating competitive advantages. (7th ed.). New York: McGraw-Hill/Irwin.
LaPlante, A. (2006, October 1). Glenn Carroll: How Do You Successfully Merge Two Corporate Cultures? Retrieved January 18, 2016, from https://www.gsb.stanford.edu/insights/glenn-carroll-how-do-you-successfully-merge-two-corporate-cultures

3.What are the major advantages and disadvantages of mergers and acquisitions? Why is it so difficult to integrate firms together after a merger or acquisition? Share your experience with a merger or acquisition if you have been through one or find a case of merger from the news or online sources and post a comment on the consequences of such strategy.

Mergers and acquisitions is one of three ways that “a firm may undertake to achieve synergies and create value for its shareholders” (Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. , 2014 p. 193). An acquisition is defined as “the incorporation of one firm into another through purchase” (Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. 2014, p. 193). And a merger is defined as the combining of two or more firms into one new legal entity” (Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. , 2014 p. 193). With a merger or acquisition one benefit is that is a quick way to enter new markets and provide a corporation with high level of control over the acquired business. Acquisitions are very expensive as they have to pay a large price to buy the stocks and shareholders payouts.

Some of the advantages and disadvantages of mergers and acquisitions are:

Acquisitions are very expensive
Mergers and acquisitions can be a means of obtaining valuable resources that can help an organization expand its product offerings and services
they can provide the the opportunity for firms to attain the three cases of synergy – leveraging core competencies, sharing activities, and building market power
Lead to consolidations within an industry and can fore other players to merge
can enter new market segments by way of acquisitions
competing firms often can imitate any advantages realized or copy synergies that result from the merger and acquisition
managers’ credibility and ego can sometimes get in the way of sound business decisions
there can be many cultural issues that may doom the intended benefits from M&A endeavors
when a M&A takes place it usually results in alot of press coverage which can be an advantage

(Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. pp.194-196).

I have been through multiple acquisitions in the past few years. First Hospice #1 was acquired by Hospice #2 and became Hospice #2. The branding was not changed in this area of South Carolina due to the good reputation Hospice #1 had. Numerous corporate positions changed, policies and procedures changed but the end result remained the same and business continued to grow in this area. A couple of years later Hospice#2 was involved in yet another acquisition by Hospice #3 which made Hospice #3 the largest hospice in the United States. Again, the branding did not change for one of the local offices because of the business relationship and huge growth that one of the Hospice #2 South Carolina offices had. It was just as the first acquisition corporate top level employees were the first to get cut and divisional changes made. Hospice #3 kept some of their processes and kept some of Hospice #2 processes making good use of the best practices method. Cultural changes took place each time because of the differences in the two corporations. Still, the end result was business continuing to grow. After 2-3 years the branding of the one office was forced to change its name to the same as Hospice #3. With these acquisitions local management positions were not effected leaving the local offices basically the same as before the acquisition. Most recently, Hospice #3 when through a hostile takeover by a large healthcare corporation that was successful in hospitals, rehabs, private care and multiple other health care areas. What they did not have was a hospice and home health that Hospice #3 had. In the beginning of the hostile takeover publicity the CEO met with all employees locally and explained that this was not going to happen and asked that no one sell their stock when they were contacted by the K company. A few months later Hospice #3 came to an agreement and agreed to the acquisition price from the K company. Again, the first to go were corporate level positions. The K company kept some of Hospice #3 corporate employees and replaced some with K company employees. Each stock owner was paid a set price for their stock during this acquisition. Hospice #3 now has the same name with an extra branding…..”Hospice #3 a K company”. Marketers were educated on what to tell their customers about the acquisition. Cultural in the offices has changed due to the differences this K company is making with employee benefits, procedures and such. For the K company this acquisition has been very beneficial for them as they are now the largest healthcare corporation in the United States that has the market share for multiple divisions of healthcare.

Each of these acquisitions always caused alot of stress and uncertainty to employees locally, as they never knew what changes were coming. As I look back on each of these I see the business benefits for each acquisition. It is all about owning the market share and having the potential to treat a patient from beginning to end as this is part of the new healthcare reform. Certain hospitals will be chosen as the one who manages and provides all the care for a patient from the time they are admitted through discharge to home with therapy, rehab, hospice and etc.

I left Hospice #3 after twelve years and am now at a hospice that recently acquired another small local hospice causing alot of upset and changes for those employees. Their procedures and staff management was no where similar to H Hospice and after 90 days numerous staff positions and benefits changes were made that was upsetting to many employees involved.

Reference:

Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. (2014). Strategic management: Creating competitive advantages. (7th ed.). New York: McGraw-Hill/Irwin.

4.Business-Level Strategies VS Corporate-Level Strategies

Business-Level Strategies

Corporate-Level Strategies

– Driven by internal operations and preferences of the market

– Focuses on long-term revenue, profits, and market value

– Competes within a single business

– Manages operations in multiple businesses

– Consists of competitive advantages: cost leadership, differentiation, focus

– Places emphasis on diversification

– Affects functional decisions

– Common to see mergers, acquisitions, joint ventures

– High desire to gain consumer

– Requires foundation of successful business-level strategy

– Concerned with industry

– Pursues opportunities outside industry

(Dess, Lumpkin, Eisner, & McNamara, 2014)

Business-Level Strategy: The range of this strategy is more personal. An example would be a family-owned bakery. The bakery must recognize, create, and maintain its opportunities and competitive advantages. For the bakery, this may not be price. The bakery is likely competing with chains that can offer their products for less. Instead, the bakery can differentiate itself through the unique experience, personal atmosphere, quality ingredients, and fresh products. These are all aspects the consumers are willing to pay more for.

Corporate-Level Strategy: The range of this strategy is broader than the business-level strategy. Let’s say the family-owned bakery is highly successful and turns into a chain across the East Coast.

The bakery may look to diversify and enter the coffee business. This compliments baked goods but is also another industry. The bakery should have a strong business-level strategy to ensure effective and efficient operations at the corporate-level.

Reference

Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. (2014). Strategic management: Creating competitive advantages. (7th ed.). New York: McGraw-Hill/Irwin.

5.The difference between business-level and corporate-level strategies is essentially one of scope. Business-level strategies are those that are “designed for a firm or a division of a firm that competes within in single business” (Dess, Lumpkin, Eisner, & McNamara, 2014, p. 142). In other words, these strategies are somewhat smaller in scope and focus on a single business or business within a firm. An example could be a smaller business such as a local plumber. The plumber’s business is singular in nature – all he or she does is plumbing – therefore their strategies would be business-level strategies. If that plumber were to expand and acquire an HVAC business as well, then any strategies designed for only the plumbing division of the business would still be business-level strategies.

A more specific example of a business-level strategy for our plumber could be the pursuit of a differentiation strategy, or “a firm’s generic strategy based on creating differences in the firm’s product or service offering by creating something that is perceived industrywide as unique and valued by customers” (Dess, Lumpkin, Eisner, & McNamara, 2014, p. 147). The plumber could seek to differentiate his or her business through methods such as innovation – the use of a new type of plumbing pipe to improve speed and lower costs, customer service – on call service at any time to help in emergencies, or technology – the use of cameras to diagnose plumbing issues without demolishing home interiors.

Corporate-level strategies expand the scope of business-level strategies to incorporate the entire firm. They are strategies that focus “on gaining long0term revenue, profits, and market value through managing operations in multiple businesses” (Dess, Lumpkin, Eisner, & McNamara, 2014, p. 180). In our plumbing and HVAC example, any strategies that impact the firm overall, including both the plumbing and HVAC division, would be considered corporate-level strategies. An example would be the potential for expanding into a new market city. This expansion would impact both the plumbing and HVAC divisions, as well as revenues for the firm as a whole.

One example of a corporate-level strategy is related diversification in which a firm enters “a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power” (Dess, Lumpkin, Eisner, & McNamara, 2014, p. 182). Again, we will apply this to our plumbing/HVAC business. Let’s assume that the CEO is searching for a means to increase revenue at the corporate level, apart from targeted improvements to each business division. Through related diversification, the firm may acquire a local electrical contractor. In that way the firm is expanding into a new business in the hopes of increasing revenue. This is not a totally unrelated business, however. Our firm is in fact leveraging its core competencies by remaining in the construction/service industry. Core competencies such as service, customer / builder relations, and building code expertise can all be applied to the electrical business just as they were to the plumbing and HVAC business. Furthermore, there is the potential for the combination of three business divisions to increase revenues due to the ease builders and homeowners would have with dealing with a single firm rather than three.

Reference

Dess, G., Lumpkin, G., Eisner, A., & McNamara, G. (2014). Strategic management: Creating competitive advantages. (7th ed.). New York, NY: Mcgraw-Hill Education.