Impacts of mergers and acquisitions Abstract

Impacts of mergers and acquisitions Abstract

Impactsof mergers and acquisitions

Abstract

Mergingand acquisition of companies are meant to improve on quality ofservice as well as improved profits. They are made essential due tocurrent competitiveness across the globe. The practice has tremendousadvantages as well as challenges to operate effectively. As forupcoming firms, they face numerous challenges hence the need todesign laws and mechanisms of assisting them compete with establishedcompanies. The legal barriers affecting emergence of new firms arealso quite diverse.

Mergerscan be described as combination or rather joining together ofcompanies with the aim of forming a single one. This leads to theformation of a new company. Acquisition on the other hand entails thepurchase of one company by another. Acquisition does not necessarilylead to formation of a new company. These two norms are quite commonand have impacted vastly on how organizations conduct theirbusinesses.

Inthe first example, it is questionable why the drug maker could play arole in stymieing the introduction of a new product. In the currentbusiness world competition has become quite immense, with companiesintroducing products with a variety of prices. In that respect, somecompanies are forced to revise their pricing to remain relevant. Fromthis first example, it is evident that introduction of lower pricedgeneric drugs could affect the drug maker in terms of profits made.Introduction of cheaper drugs would draw many consumers to them tothe disadvantage of the original drugs.

Additionally,the brand-name could be a genuine reason for the drug maker to delayrelease of generic alternatives. Branding is a major concern in thecurrent competitive markets. For instance, upcoming companies tend touse brand names that are almost similar to established ones to markettheir products and services. This is mainly done to somehow confusethe consumers. The drug maker in this first example may be havingfears that use of similar brand name on the generic drugs couldaffect their production levels and hence impact negatively onprofits.

Entryinto the market is quite hectic in various aspects. In thepharmaceuticals field, there exist a number of barriers that couldhinder entry into the markets. Manufacturers can be categorized intotwo i.e. pioneer firms who uncover new drugs and introduce them intothe markets and the generic firms that imitate the original products.Legal procedures deem quality and safety as major aspects to considerwhen venturing into the market. As per the legal process, a companymust have approval from the concerned body before introducing aproduct into the market. It must satisfy all safety requirements soas not to endanger the public. Researches suggest that generic firmsfind it hard to venture into the market, especially when it comes tothe application process. Checks on quality and safety take muchlonger and can be quite unpredictable [ CITATION Fio08 l 1033 ].

Productdifferentiation is another important type of legal requirement. It isa legal requirement for any upcoming firm to distinguish itself fromany established company. In that respect, when venturing into themarket, a firm should consider its brand name with much vigor.Advertising is a bit challenging due to this requirement. Ittherefore poses a huge barrier towards introduction of genericproducts. As evidenced in the first example, generic products find ithard to brand and advertise their products. The pioneer firms try tomake it hard for generic companies to establish due to the dangerthey pose especially in matters pertaining profits [ CITATION Adv15 l 1033 ].

Governmentpolicies such as licensing, pollution standards as well asaccessibility to raw materials can hinder entrance into the market.Upcoming firms may find it hard to meet these standards as well asthe costs involved. It becomes even harder for generic firms to meetall these standards and without proper mechanisms some opt not toventure at all [ CITATION Adv15 l 1033 ].

Fromthe first example, the Federal Trade Commission face a huge challengeof establishing the role played by the drug maker in stymieing theintroduction of generic products. The pioneer firm cites brand nameas a major concern which may be quite genuine but then again if thegeneric drugs are safe and cheap, they are bound to be introduced. Itis therefore quite hectic to establish which position to take i.e.originality of product or affordability.

Thesecond example tries to illustrate the implication of mergingcompanies. Merging can be quite advantageous especially in terms oftraversing the markets. However, it also brings about a number ofchallenges. It is therefore imperative to look at both sides and tryto establish the best way forward.

Mergersand Acquisitions are quite advantageous in aspects such as taxbenefits, growth and expansion, market penetration, diversification,skills and knowledge, improves on research and development amongothers. Merging of the two telecommunication companies can boostmarket penetration immensely. The companies may be having differentcustomers and by merging they draw in a larger number of customershence penetrating the markets with ease.

Itis also quite logical for the companies to share thoughts on researchstudies to further establish improvement areas. Merging can boost theresearch works tremendously thus impacting positively on bothcompanies. With the companies merging, the quality of service couldalso be on the rise. This is due to well qualified personnel who arehighly skilled. The companies can also enjoy reduced costs ofoperation, taxes among others as opposed to individual operation [ CITATION jus15 l 1033 ].

Thoughjoining of companies can be quite beneficial, the challenges involvedare also quite real. The most common challenges include leadershipissues, culture clash, consumer perceptions, layoffs among others.Though merging reduces labor force and probably leads to reducedcosts, it can also lead to some of the personnel losing their jobs.Employees may become less productive, working in fear and lessmotivated. Merging may also be faced with leadership wrangles betweenthe two companies. In whatever case, a company must have a head whichmight be quite challenging to settle on one. The two companies oughtto be operating with diverse cultures and joining may needstreamlining of some of the cultures. It may pose a huge challengedoing so and often resulting in conflicts. Consumer perceptions arealso an important consideration. How the consumer views the merge isquite important since he/she may have a dislike on either of them [ CITATION Wen15 l 1033 ].

Mergingof the two telecommunication companies could provide them withsynergies that improve on profitability and efficiency. With theevolving technological globe and the competitions involved, joiningtogether may be a huge boost to traverse across the world marketsdiligently. It is however imperative for the parties involved totread cautiously due to the disadvantages involved. They shouldensure terms of merging are transparent and represent both of themcomfortably, so that in case one company opts out at some point,correct procedures are followed.

References

Advameg. (2015). Barriers to Market entry. Retrieved September 23, 2015, from Barriers to Market entry: http://www.referenceforbusiness.com/small/A-Bo/Barriers-to-Market-Entry.html

Clark, W. (2015). The Disadvantages of Merging Companies. Retrieved September 23, 2015, from The Disadvantages of Merging Companies: http://www.ehow.com/info_8199594_disadvantages-merging-companies.html

Justin Schamotta, D. M. (2015). The advantages of company mergers. Retrieved September 23, 2015, from The advantages of company mergers: http://smallbusiness.chron.com/advantages-company-mergers-22476.html

Morton, F. M. (2008). Barriers to Entry, Brand Advertising, and Generic Entry in the U.S. Pharmaceutical industry. Barriers to Entry, Brand Advertising, and Generic Entry in the U.S. Pharmaceutical industry , 1-22.