Mergers And Shareholder Wealth – Types Of Mergers, Benefits, And Management Decisions

Types of Mergers

Discuss about the Mergers and shareholder wealth.

A merger is a business scenario where two companies, of the same or different sizes regarding resources and market shares, come together and combine into one company. In some instances, mergers may mean that a big company buys a smaller one.

This is a type of merge that happens between firms or companies within the same line of production or the same industry. This merger is a consolidation made by businesses who are competitors to each other as they tend to offer similar services or goods, companies who operate within the same geographical locality and are in often struggle to get the lion’s share of the very same market. This type of merger However in most case occurs within industries with a small number of firms. This is because the competition is great and the advantages of a potential gain in the market are much higher after the merge (Brueller et al. 2014).

This is a merge that occurs between companies that are totally unrelated when it comes to the products ar services that they offer to their customers. There exist two types of conglomerate mergers, the mixed and the pure one. The mixed conglomerate is the type of merge that is evident in firms that are anticipating for extension of their products and services to the market where the pure conglomerate is a merge that happens where there is nothing in common between the two firms.

This is a form of a merger that happens between firms that deal in the production and selling of similar products or services, but they sell them at separately different markets. This alliance aims at ensuring that the emerging company gets access to a larger marketing base and an increase of their client base in these combined markets.

This is the type of merger that happens when companies are dealing with the production of related goods and serving the same market joining forces. This kind of merger enables the two firms to group together their products creating a variety hence having access to a larger consumer base with a higher bargaining power and thus earning bigger returns.

This is the type of alliance that happens when two companies producing different services or good for one particular finished good come together. Mostly occurs when companies which operate at different levels in a particular supply chain of an industry merge their operations (Fan & Goyal, 2006).

Benefits of Mergers

The merger between Mitre 9 and Maters Home Improvement is a horizontal merge as they are companies within the same line of production dealing with the sale of their services all over Australia. The horizontal merger also consolidates businesses who are competitors to each other as they tend to offer similar services or goods, companies who operate within the same geographical locality give evidence of the same as the two hardware operate in Australia and offer the same products.

The merger, in most instances, is a tool where firms dealing with the production and sale of similar or complementary products identifies a market competition and come together by combining their resources and strengths with the aim of boosting their bargaining power in the market. A merger also helps in cost cutting in various aspects of cut cost leadership, transportation, advertisements, unnecessary competition and the monthly wage bill. Mergers help companies in realizing the long-term expansion of their outbound operations and profitability (DeLong, 2001).

Acquisition of the other hand means, a company, in most cases a large company, purchasing a small company with all its resources and labor forces. The acquisition is important and plays a key role in organizational operations, and programming as new talents from the smaller firms are incorporated into the large company to boost its operation (Buono & Bowditch, 2003).

In mergers and acquisition, the business transaction will take place in the form of large or small means. In the large form, the transaction will transfer significant value in the form of investors and employees. The small form includes the sale of the business (De Man & Duysters, 2005).

The assumptions that were made as a result of the merger between Mitre 9, a service hardware store, and the Maters Home Improvement, a low-cost hardware store, are;

1. The two corporations have much to gain from the merger; the assumption of globalization and the change of marketing environments has much more to gain from the merger hence more profits for the two companies.
2. The merger will increase the bargaining power of the two hardware; the two companies assumed that through their merge they would be able to kill off unnecessary competition which had earlier made them reduce the prices of their hardware commodities. Through the merge, they will be able to increase the prices of their hardware commodities as they will have eliminated the competition between them hence, even more, profit (Andrade et al. 2001).
3. The merger will improve the market base; through the merge, the two companies will join their resources together and become even more efficient in accessing, even more, market for their customers. They will take advantage of the internet marketing previously used by Maters Home Improvement to achieve these goals and hence improve their market sales (Hijzen et al. 2008).
4. The assumption of equal distribution of power; the merge will result in an equal distribution of power to the various management staff initially present in the two firms. This is to ensure that both parties are equally represented in the newly formed company.
5. The merge will lead to a joint decision making; through the equal distribution of power to management committee in the formed firm, the decision making will be done jointly with no bias to or against any individual firm.
6. The assumption of no negative outcome from the customers or the workers; the merge assumed that there will be no negative effects will arise from customers or workers resulting from the merge and that the two companies will retain its original workers and customers.

For a successful merger, decisions made and the management technique put in place will determine whether the merger will survive or not. After the merge of Maters Home Improvement and Mitre 9, the management on both sides of the two companies should choose representatives to represent their company’s interests in the discussion of the issues that were initially perceived as benefits to be realized after the merge. Strengths and weaknesses should be discussed and analyzed. The management should assess areas like;

1. Mission and vision; Every business enterprise goal and aim is to generate revenue through the provision of services they render or the goods that they produce. As part of the discussion, representatives from Maters Home Improvement and Mitre 9 should address the vision and mission of the newly formed Hardware-Are-Us. The two organizations will try and align their different respective visions and mission to come up with a revised one. This is important as the vision, and the mission state gives a sense of the direction of where the newly born company is heading to.
2. b) Strategy; the newly formed Hardware-Are-Us needs to come up with a unified and common strategy on which they will operate on. The strategy proves crucial as it provides a guide to the way forward with respect the agreed upon mission and the vision statement. Strategy in the large scale planning may prove challenging especially when Hardware-Are-Us is trying to stabilize and channeling most of its activities in the integration activities however efficient strategic processes like the Real Time Strategic Planning could prove very handy and help the staff leaders and the board at large in the process of initiating their strategic plans around the absolute significant opportunities that were seen before they two companies decided to merge and emerging issues that are currently facing Hardware-Are-Us in achieving its goals. Like, for example, the issue of Mitre 9 ‘s outdated system should be complemented and supported by Maters Home Improvement’s advanced system. The newly formed Hardware-r-us company should thus incorporate Maters Home Improvement’s advanced system of online service booking system for small jobs (Melville et al. 2004).

1. Fiscal/ monetary management: money is a very sensitive factor of production in any organization. It becomes even more sensitive when a merging organization has developed disagreement on the financial contribution and the monitoring process and continued disagreements on the financial grounds between Maters Home Improvement, and Mitre 9 will lead to a break of Hardware-Are-Us. The elected board need to agree on financial grounds like for example the process of financial oversight and the financial percentage contribution of the individual firm in the newly formed Hardware-Are-Us. The assessment of the financial matters will ensure alignment on necessity parts of monetary responsibilities of the board with zero participation of the board in the day-to-day financial management as that is left entirely to the staff.
2. Risk management; the merge to Hardware-Are-Us did create an opportunity for the board to evaluate the risk as part of their management role. This involves processes like the maintenance of insurance policies, determination and monitoring potential risks and ascertaining that the staff is fully equipped with risk management procedures. This proves useful as Hardware-Are-Us may consider expanding through expansion program activities and determination of expansion opportunities which is a good example of risk taking activity by any business organization.
3. Resources acquisition; Maters Home Improvement and Mitre 9 board members had very different experience in their method of acquiring resources and different expectations when involved in fund generation and development. They had a different scenario when it came to planning, investors, and approaches and of course their individual contributions. The process involved in the management and the alignment of these different experiences in Hardware-Are-Us can prove challenging, and the board needs to lay down their methods of resource acquisition and the very best be selected after a joint agreement (Wade & Hulland, 2004).
4. Program effectiveness; the process of creating an appropriate program monitor is a crucial part of the board of Hardware-Are-Us. They must create trust and respect for the respective roles so that the board does not find itself engaging in the day-to-day management of staff and programs. The board thus will depend on the staff to deliver a timely report and an effective evaluation of programs in Hardware-Are-Us.
5. The relationship with the CEO; a merger to form Hardware-Are-Us means that if not all then part of the management committee shall be working with a new CEO. This can be problematic if part of the management committee says from the Mitre 9 side feel that their supervisory role has been minimized or may be challenged. Hence to avoid this, the board must ensure that there is a unified expectation when it comes to a relationship with the CEO and that they do not cross their line and start assuming the role of the CEO (Cybo-Ottone & Murgia, 2000).
6. Board engagement, culture, and structure; a successful board is the one that is engaged. The successfully engaged board members often find themselves being to creating an efficient and effective board structure. This will become a habit and thus develop a culture and thus success of the merge.

An information system is a component set that is integrated together and applicable in areas of data collection, storage and processing to provide the desired information. The information system entails the use of software and a hardware part of an electronic device, mostly a computer to carry out data manipulation process.

Management Decisions After The Merge

Information technology entailed the usage of computers in the storage of data and information, networking and an electronic device, infrastructure and all the process that entailed the creation, storage, security and facilitated the exchange of various types of data.

The use of information system in the newly formed Hardware-Are-us has an effect on the customer choice, the continued patronage, and brand loyalty in the following ways;

1. The adoption of IT will help Hardware-Are-Us in solving problems; the use of smart applications such as the collaborative programs an example being the Kanban board and the mind mapping programs an example being X mind together with the tangible elements such as the excellent processors and memory will help the organization to conduct market research faster, give a breakdown of the findings and provide a viable scalability on which the business will operate on. This is advantageous as Hardware-Are-Us will receive a continued patronage from its shareholders, investors, and even the consumers.
2. Incorporation of IT will be a certain proper decision making; excellent decision making by any business relies heavily on the market research done by the business. This is very much achievable through video conferencing with clients of their tastes and preferences and the improvements that Hardware-Are-Us should make, review of consumers’ feedback on media and industrial platforms and the use of online survey on the interest of getting consumers’ feedback. This can be used to improve the taste and adjust to changes that are considered drawback in their products and services Hardware-Are-Us offer and thus continued patronage and brand loyalty from consumers (Venkatesh et al. 2003).
3. The IT has excellent marketing opportunities; Hardware-Are-Us can embrace internet marketing techniques such as Facebook Ads and SEO. These methods happen to be more efficient compared to the traditional marketing methods as they cover a larger global geographical area hence the target market can be approached from anywhere. The internet can also aid the company in building a marketing campaign through advertising hence increase on customer choice, loyalty and market (Longley et al. 2001).
4. They can support firm’s operations by improving on speed; This saves the time required to make a decision, and hence time takes to initiate an action. For example, through the use of information technologies to communicate such as the use of emails allows the management and staff to communicate instantly and initiate actions immediately compare to the traditional means such as speaking in meeting and writing letters. This can be crucial in cases where immediate response are needed to a customer and thus improves on customer trust and confidence to the company. (Hogan et al. 2002).
5. Used to create and enhance new strategies required by the company; like for instance if a company’s strategy is to minimize the cost of production, IT can be incorporated to make the overall production cost cheaper and thus the overall products of Hardware-are-us will be cheaper hence attracting more customer and retaining the existing ones.
6. Can be useful in the creation of a competitive advantage; the use of IT by Hardware-Are-Us can be used to creating a unique technology into a product that other companies find difficult to enumerate hence reducing the threat of consumer switching to other competitive products hence ensuring brand loyalty (Laudon & Laudon, 2004).

Advertising is mainly done to create promising leads that a consumer can get for the value of money charged. Advertising creates awareness of a particular product or service that hits the targeted market and also the potential market targets and gives a showcase value that the company is willing to offer to its consumers. Advertisement can be achieved in several forms from media in the form of television and radios to billboards.

Referrals from networking in addition to the past associates of the individual businesses are not only a cheap way to start the merged company but also a means to attract more consumers in possession of high retention rates (Seybold et al. 2001).

The hardware-are-us company should avail itself to the consumers by opening up many stalls all over the country with the company’s Logo on the front and a brief description of the services they offer. By so doing the company has availed itself and has marketed itself to the people hence attracting more customers (Blattberg & Deighton, 1996).

Since they merged and had taken advantage of Maters Home Improvement’s internet and online capabilities. Hardware-Are-Us should open a web page of their own to market their products and services. They should encourage subscription through emails and Facebook so that they can send daily updates to their customers and the newly signed customers (O’Brien & Marakas, 2005).

Conclusion

Mergers are being done everywhere as firms have realized the need to put to rest the unnecessary competition, join forces and resources and channel all their expertise to the production of goods and services at a favorable market price. Depends on the outline, vision, mission, strategies to be put in place, risks to be taken and the ones to be avoided and the management committee to be formed under to bias to a particular firm. The main problem of a merger is the dispute that may arise as a result of unequal sharing of either power, expenses, profits or lack of representation of one of the firms. A successful merger is not only profitable to the businesses merging but also to the consumer as it ensures a continued supply of their goods and services.

Information System and Information Technology

Proper guidelines should be laid down in the event before the merge. Factors such as the management committee, decision-making process, financial contribution of each, the workers and employees to be retained and much more should be considered. This will ensure a smooth merging process. After the merger clear guidelines of the mission, vision and goal of the newly formed company should be stipulated and ways and means to attain their realization be clearly laid down, merger can be very profitable when there are proper guidelines and division of roles and duties of each employee but when done carelessly it can lead to huge losses.

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