When an acquisition is based on sound strategies and well thought out plans, the chances of failure as far as mergers and acquisitions are concerned are significantly reduced. It hence follows that there are a number of strategies that must be adopted in regard to M&A deals. In this text, I concern myself with acquisition strategy. I look at two companies that are using acquisitions to strengthen their positions in the market and how the acquisitions have underlined the competitive capabilities as well as resource strengths of the acquiring companies.
According to Gamble & Thompson (2011), acquisitions give companies quite a number of benefits. The enhancement of market positions is one of them. Generally, acquisitions are driven or motivated by the prospects of economic gains. Thus the bottom line in this case is that for an acquisition deal to be viable, the two companies must be better off when they are together i.e. when they are operating as a single entity than when they are operating as two different entities.
Hence in passing, some of the other significant benefits which accrue from an acquisition include but are not in any way limited to tax advantages, enhancement of efficiency, complimentary resources combination as well as the enhancement of economies of scale. Two of the companies that happen to be in different industry and that have used acquisitions as a basis for the enhancement of their market positions include Danone and End2End. On the release of its financial reports late last year, the company stated that the drivers of future as well as present growth were the emerging markets.
In line with this prediction, the company went ahead to use acquisition to make an entry into the US frozen yoghurt marketplace through the very acquisition of Dean Foods. Dean Foods has over time been seen as a market leader as far as milk production in the United States is concerned. When it comes to the enhancement of the resource strengths as well as competitive stabilities of Danone, the company is positioned to access extensive distribution networks which it shall reinforce with its channels which already happen to be in existence.
When it comes to End2End which is arguably the largest mobile content as well as services B2B managed service solution provider in Europe, acquisition has long been seen as the only way to further strengthen its already solid market position. Thus, the recent acquisition of MIG way A/S by End2End has largely been seen by market analysts as a par of a long-term strategy by the company ton further extend its tentacles across the region. LogicaCMG and TDC have been the previous owners of MIG way A/S.
One of the things MIG way A/S is best known for includes its role in powering not only MSN Messenger but also Hotmail mobile services. It is important to note that when it comes to the enhancement of the resource strengths as well as competitive stabilities of End2End, the acquisition brought about synergy as far as the connectivity offering of End2End is concerned and the services and solutions offered by MIGway A/S including but not limited to Signaling System 7 connectivity (SS7) and the Short Message Service Centre.
Hence with the discussion above in mind, it remains clear that companies wishing to remain relevant in today’s ever competitive business environment could choose to consider acquisitions. However, it is important to note that acquisitions also have their inherent limitations and complexities including the treatment of a number of legal and tax issues arising from the same as well as transaction evaluation difficulties.
Gamble, J., & Thompson, A. (2011). Essentials of Strategic Management: The Quest for
Competitive Advantage. New York: McGraw-Hill Irwin