2.1 Introduction of Business Combinations
In this sub-chapter, the main aim is to give a general idea about the business combinations through identify the motivations by applying the business combinations to conclude the transactions or events between the acquirer and acquiree in a business. Namely, defining the business combinations. Moreover, the different types of the methods to conclude a business combination.
2.1.1 Motives for Business Combinations
Nowadays, with the consecutive development of the economic globalization and the trend of growing competition on the world stage, business combinations are becoming more popular and frequently used methods for the development of the companies in the 21st century. In terms of accounting, Mergers
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In other words, some enterprises seek the chances to improve the financial performance of the business, make the company growth by owning new markets or increasing the market shares of the company, or through the reduction of the operating costs, to have some benefits in tax aspects and management incentives. The following aspects are the key factors, when considering the improvement for the financial performance and they are also known as the dominant rationale to form the business combinations:
• Synergy: Synergy means two or more companies functioning together and produces a result greater than the each company produced individually or even achieves a result that cannot be obtained by a separate company alone. If this term applies in a form of business, synergy means teamwork produce a better result than if the work doing it separately in a group. The effects of the synergy for a company can be remarkable, such as help earning higher revenues or lowering the expense or the overall cost of
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Therefore, from this point of view, a profitable enterprise can combine with a loss maker and use this chance as a way to reduce the tax liabilities for a combined enterprise.
2.1.2 Definition of Business Combinations
Business combinations are mainly an activity or transaction where an acquirer obtains control of either one or more than one business. Generally, the business combinations refer to the transactions in which companies gain the control or the shares of the control in another company. In other words, events or transactions in two or more business enterprises or their net assets are combined under control of the single business entity. A business combination can be easily managed through the acquisitions, mergers and so on.
Mergers: mergers usually mean to combine the two companies in to a lager single company, either through creating a totally new company or continuing the operation of the partners “under the roof” of any one of them. The aim of merger is to enhance the financial and operational capacity of the
These facts gave the idea of combining the 2 to make one big company instead of losing money from competing constantly.
This strategy is much more harder to implement as Cobra would need to go to their parent company Molson Coors and explain the idea and even need their backing financially. Molson Coors may be expecting a certain return before they invest any money so that would need to be considered. This can help Molson Coors throughout their other beers as they produce other beers and buying a can supplier can be beneficially for all the beers they produce. Additionally if they reject the idea and Cobra want to still go ahead with it they might have to look for foreign investment to be able to do it. To be able to implement this idea there would need to be either a takeover of the supplier or a joint venture.
For instance, John D. Rockefeller pursued numerous of strategies, to try to eliminate his competitors. From horizontal integration, in which he tried to buy or force his competitors out, to vertical integration, which Andrew Carnegie also practiced, meaning they eventually owned everything they needed to produce. J. Pierpont Morgan had a different strategy in an attempt to monopolize his company, he would help merge competing corporations by purchasing massive amounts of stocks and selling them at a profit. These strategies helped capitalize the entrepreneurs control in the growing
Target established itself as the highest-earning division of the Dayton-Hudson Corporation in the 1970s it began expanding the store nationwide in the 1980s, and introduced new store formats under the Target branding in the 1990s. The parent company was renamed the Target Corporation in 2000, and divested itself of its last department store chains in 2004. It suffered from a highly publicized security breach of customer data and the failure of its short-lived Canadian subsidiary in the early 2010s, although experienced revitalized success with its expansion in urban markets the United
Anti- trust Laws of United states Antitrust law United States antitrust laws are referred to as competition laws. These laws are enforced by the government to protect consumers from vulturous business practices and ensuring that a clean competition exists in the open market economy. Congress was the first to pass the anti-trust law, the Sherman Act was the first law to be passed in the year 1890 as a comprehensive character of economic liberty which aims to preserve free and unfettered competition as a rule of the trade. In the year 1914 two more additional antitrust laws were passed by the congress: The Federal Trade Commission Act and the Clayton Act. These are the three core federal act which are being in effect today.
The period from 1865 to 1900 was characterized by an astronomical boom in industry and manufacturing, economic growth for the rich, financial turmoil for the poor, and political corruption. As a result, the era has been named “The Gilded Age.” Just as something gilded is gold on the outside but worthless metal on the inside, these years seemed prosperous from an outside perspective, when in reality, the wealth gap was increasing at an alarming rate and big business had power over government officials. As a result of this, a lot of federal legislation was influenced by monopolies and often catered to the desires of businessmen. Since regulation of certain business practices would cause these trusts to lose money, Congress shied away from regulating
What is Research? It is a careful investigation of a problem in a scientific manner, especially to search for new facts in any side of knowledge. And it is searching for theory or opinion for testing them or for solving issues. And a scientific way for answering questions and testing hypotheses.
Increased Work Efficiency / Productivity A team that has good culture of teamwork and mutual motivation will make the members more productive and smarter. Such a team where seamless and effective relationships exist, members are poised to learn from one another, develop skills and leverage on such internally gained skills to expedite work processes thereby increasing overall efficiency, reducing downtimes and knowledge gaps. Collaboration among such team members will make members to perform at their best by working on what they do best.
The concept of vertical integration received an immense
In 2002, the SEC adopted new rules and amendments to address public companies’ disclosure or release of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles. The accrual accounting is more popular and be widely used in business world because it produces more accurate and faithful financial statements that constitute better representation of actual circumstances than its main competitors. The major weakness of accrual accounting is that there is some time issue such like the time of occurred and time of recorded would probably be different and it increases the risk of financial information and the risk of correctness. Also, the accrual accounting generally cost more to operate compared with cash accounting
Many mergers tend to fail and many others succeed. A merger is the combining of assets and operations, usually between two similar sized companies, in an agreement to join together. Mergers can cause bankruptcy, job losses, less choices, and even a breakup. On the other hand, they have many advantages such as, increased market share, lower cost of production, and higher competitiveness. Most mergers can be highly risky but with the presence of knowledge and intuition they can be successful.
Why is such a question relevant to a company like ICI, which is considering a specific acquisition? Explain your answers. Answer: From the stand point of society, synergy is the only benefit to the same. Tax considerations, diversification, control, purchase of assets below replacement cost are not relevant from the standpoint of society.
Apple Inc. embraces diversification strategy as a means of promoting its viability in the market. Largely, the creation of the three products lines compounds the sources of the company’s income. In fact, the company does not rely on a single source of income because the product design belongs to different categories. This strategy cushions the business from suffering risks of associated with depending on a single business. According Hitt, Ireland, and Hoskisson (2014, p.135), the benefit of handling many products is that when one product fail or does poorly in the market, the business is would shift its attention of the best performing products.
Due to different country’s policy, different business model are required for IKEA to run their business. For examples, IKEA will need to implement joint ventures as their business model to become successful in the Indian and China marketplace. Since the government for these countries requires that local business operations own about 51% control by Indian nationals, IKEA 's should find the right partner for its own. There are some advantages and disadvantages for IKEA to implement Joint venture as their business model. For the advantages are provide an opportunity to IKEA to access to the new markets and distribution networks, increased capacity to expand their business in foreign market, IKEA can share the risks and costs together with their partners and it will help IKEA to access to local resources, including specialised staff, technology and finance aspect.
(a) Background information on the companies. (Describe your companies’ profile and core business activities.) In this assignment, the 2 companies selected in a same industry are Hup Seng Industries BHD. and Apollo Food Holdings BHD.