Acquire The Challenges And The Company With Smart Moves
For the complexity of a merger and acquisition process, an equally intimidating part is overcoming the countless challenges and market influences of the deal along with going ahead with it. Why is the road to acquiring another entity filled with so many blockades? Is it possible to overcome them and create successful mergers? The answer to the second question is affirmative and we have seen that over the history multiple times when corporate giants merged to form bigger consolidates and conglomerates. Why is this process then still giving tremors in the business world and the market? This issue can be addressed by answering the first question.
The first market response can be positive to mixed
When a merging or takeover news hits the public forum, the market usually takes it on a positive note. The shares of the target company start increasing to match to the share price of the acquirer if the deal price is high enough or below the market standard and also on the expectation that the acquired company will make better figures in the days to come. Price revival can also be expected due to the expectations that the company will attract rivals of the bidding company.
If the share price of the target entity trades low in the market, once the deal is finalized but before closing it, the acquired company will feel the impact, making the deal less friendly. A company announces tender to invite acquirers or mergers with the hope that its business grows and the share prices soar above, finding new grounds for expansion. When the tenders give the message that the seller is on the verge of being bankrupt or reeling under debts, the response from bidders may not change in frequency but will in offered prices.
The acquirer has its hands in full
When we look towards the market opinion of an acquirer on announcing a deal, its shares may fall in prices because of the apprehension that it is acquiring a firm in ruins and may also get dragged down. Investors of the acquirer may be divided on the stability of the deal and some will think that the offered price is too high to make a commendable profit in the new run.
Therefore, the main hurdle in front of an acquirer is to get the trust of its investors. Business needs funding and here it is spending more funds to acquire another business that is not so thriving. Making the investors to continue their support and to avoid a drop in the share prices become the painstaking preliminary task for the acquirer. The CEO may be interested, now he has to get the interest from all the top management in the acquisition as well as give satisfactory explanations to the shareholders.
The new staff has to be maintained, a corporate shuffling is on its way and responsibilities may change. Severance funds may go the higher end and protect the interest of too many employees on either side is a daunting task for the initiators of the deal. All these hurdles may seem to be too risky, yet can be efficiently tackled to reduce the risk and boost the performance on longevity.