Transforming Grounds - When to Acquire Another Company

By:Jonathon Hardcastle

A strategic dilemma every corporation might face at some point has to do with the difficult decision of expanding its business through the acquisition of another company. In many cases, this type of direct investment , like in the 2000 acquisition of Nabisco by Kraft, the second only to Swiss-based Nestle in the food world market, purchasing a business unit or an entire corporation is a strategic investment choice of major importance for all stakeholders.

In fact, experienced managers around the globe, like Kraft Chief Executive Officer Roger Deromedi, attest that a company has to investigate and evaluate the opportunity of acquiring another company thoroughly before its Board of Directors reach such a decision.

When a marketing manager thinks of opportunity or problem tracing it is imperative to begin by uncovering its overlapping characteristics. For this reason it is considered absolutely necessary to conduct what businesses refer to as "situation analysis." This type of research is an informal study of what information is available in the specific area. It can help define the problem/opportunity and specify what additional information-if any-is needed. Such industry-related reports, like McKinsey's, are of great importance and value in order to obtain and maintain a closer look of the specifics of the industry under focus and its environment.

Specifically, the industry's background and trends, the level of the industry's consolidation, customer fragmentation, technological upgrading, international market forces, the ability of a company's personnel to understand the customers' needs and the significant economies of scale, are some of the areas this report has to cover.

In addition, conducting an environmental analysis and examining the socioeconomic factors of the market(s) in question can assist those who are about to take a decision to identify the key success factors that have to be considered in depth and improved/expanded if the company examined is actually acquired. Also, this type of preliminary research has been also referred to as a SWOT Analysis, since it is important to identify the strengths, weaknesses, opportunities and threats that such a business decision entails.

Later in the process, a competitive analysis has to take place so as to recognize the strengths and weaknesses of those already competing inside the specific market. As global competition has resulted in a fierce competitive environment over the recent years, new product / service developments have to offer the needed "added-value" a customer wishes to receive, even before the potential buyer realizes the existence of the specific need.

This differential advantage for the purchasing company can be the actual brand name, social role or excellent customer relationship status the company acquired has within its local market. Like in the case of Kraft and Nabisco, the latter had a very strong brand name and enjoyed high levels of identification within the Southern Mediterranean region.

By purchasing a company that has a successful history and is valued by the market players, today's businessmen find themselves in highly profitable areas with the minimum amount of direct investment apart from money.

Digg del.icio.us Blink Stumble Spurl Reddit Netscape Furl

Article keywords: Company acquisition, purchasing a business unit, investing

Article Source: http://www.articles2k.com

Jonathon Hardcastle writes articles on many topics including Investing, Consumer Information, and Real Estate

Top Investing Articles
1). Day Trading With The Camarilla Equation By : Steve Waller Origins of the Camarilla Equation Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, the 'Camarilla' equation uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean. The equation produces 8 levels that are meant to predict these reversal points allowing the trader to profit from them.
2). HYIP’s versus Autosurfs: Which Is Better For You? By : Hyip-Status.com A high yield investment program is essentially an investment in which you have the choice of how much you can invest in the program, hoping for a high yield. Any amount can be invested in a HYIP, and in fact small amounts works rather well for HYIP’s, but there is an advantage (and disadvantage) to using large investments. An autosurf is better known as a “traffic exchange”; a person buys advertising that is placed in rotation with other advertisements.
3). How to Interpret and Profit from Financial Statements By : Pleeds Financial statements are a useful tool for judging the health of a company, and for comparing it to its competitors. They show what the company owes and owns, the profits or loses it has made over a given period, and how their position has changed since their last statement. Generally if you can tell which direction a company is heading in, you can also forecast future stock prices with some accuracy.
4). Taking Control of your Finances. By : Debra Lohrere To find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest. Now before you start to think….”well I don’t have any excess left…if I was earning more money….then I would have some free”. Let me dispel this myth…and tell you that it is a known and excepted fact that the amount of money that people earn has little if any bearing on whether or not they have an excess left to invest.
5). High Yield Investing Is Like A Game Of Poker By : We often get newbies emailing us asking whether or not investing in HYIP's is worth the time and the risk. This is a great question and the short answer is "it all depends". First of all, the main question you must ask yourself before investing in any HYIP is: "Do you plan on investing money that you will definitely need in the future?" In other words,.
6). Why Are Duopolies So Competitive? By : Geoffrey Gannon A value investor looks to human nature to explain why duopolies are often so competitive.
7). Different Kinds Of Investments By : Juan José These days, you can’t retire without using the returns from investments. You can’t count on your social security checks to cover your expenses when you retire. It’s barely enough for people who are receiving it now to have food, shelter and utilities. That doesn’t account for any care you may need or in the even that you need to take advantage of such funds much earlier in life.
8). A Cooling Real Estate Market and Investing in Pre-foreclosures By : John Appleseed With the housing market cooling and demand for mortgage loans shrinking, banks and other lenders are turning to nontraditional and sometimes riskier mortgages to bring in additional business and make up their dropped off business. Many lenders have turned to mortgage products designed to lower monthly loan payments and to help borrowers qualify more readily for larger loan amounts, while others require little in the way of documentation during the approval process.
9). FOREX Investing Compared to Other Investment Opportunities By : Cindy Brooks With over $1.5 trillion changing hands daily, it might be advantageous for you to investigate the extremely lucrative business opportunity involving currency trading. Once the domain of major banks and corporations, this field is now an open playground for the ordinary individual. The following information gives you a comparison of different investment opportunities in comparison to Forex trading Forex could be the perfect opportunity for you if you are willing to have an open mind and investigate.
10). A New Exchange Traded Fund May Have a Major Impact on Long Term Silver Prices By : Andy Goldman Last week after much publicity and a long wait, the Barclay’s Silver ETF (SLV) finally started trading. And it looks like the wait was worth it.

New Investing Articles
1). Stocks - Getting Started in the Market By : Joseph Kenny Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama.
2). Introduction to Bonds By : Jim Pretin Learn about bonds and why they are a good investment vehicle
3). What Is An Investment Club? By : Roy Phay Investment clubs are very hot in the market nowadays. Thousands of individuals are investing through clubs, and many of them find a great deal of success.
4). Market of the Game By : Steven Golden An article about game economy
5). Choosing the Right Capitalization By : Robert Valentine Small, mid and large cap stocks all have their individual benefits. But which one is right for you?
6). Investing in St. Louis Real Estate By : Robert Palmer It is common for investors to express uncertainty over their ability to manage their portfolios during prolonged periods of market volatility. But prudent investors understand that making sound investment decisions shouldn’t be based on the market’s twists and turns. Rather, these decisions should stem from an understanding of investment fundamentals and an awareness of the mistakes others have made.
7). How Investment Options Works The For Buyer By : Ian Dennis A call investment option is a financial contract involving two parties, the buyer and the seller of this type of investment option. Often it is simply labeled a "call". The buyer of the option has the right but not the obligation to buy an settled quantity of a particular commodity or financial instrument from the seller of the option at a certain time for a certain price.
8). The Dow Jones Industrial Average: Failing the Average Investor By : Steve Selengut In addition to a well thought out Investment Plan, successful Equity investing requires a feel for what is going on in the real world that we all refer to as "The Market". To most investors, the DJIA provides all of the information they think they need, and they worship it mindlessly, thinking that this time tattered average has mystical predictive and analytic powers far beyond the scope of any other market number.
9). How to Spot Market Turning Points Using Free Legal Insider Information By : Steve Todd How would you like to be able to take advantage of insider information and trade with the most successful traders in energies commodities, stocks and commodities? Well you can - with the commitment of traders report, published by the CFTC. This report shows insider commercial trading positions by professional hedgers! The commitment of traders report is available FREE, but hardly any traders use it - yet it can predict tops and bottoms, with amazing accuracy, when used correctly.
10). Market Timing – A Danger to Your Financial Success By : Steve Todd Market timing are the two most dangerous words in investing - especially when practiced by novice traders. Market timing is the strategy of attempting to predict future price movements through use of various fundamental and technical analysis tools - and when used to predict trending moves, ends in disaster, and losses. Many investors feel that market timing is the same as trend following and the two go hand in hand, they don’t.