Integration – Benefits and drawbacks
Takeover/Merger
Change in the controlling interest of a corporation. A takeover may be in the form of a friendly acquisition and merger or an unfriendly bid that the management of the target company might fight with shark repellent techniques. In other words a takeover is when someone takes control of another business, ‘takes over the business’.
Benefits
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Effective planning
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Improved efficiency and fewer errors
- Better access to information, leading to a more responsive service and better relationships with customers and suppliers.
- Better use of staff time and greater job satisfaction for employees.
- Reduced costs
Drawbacks to merging
- Potential Lack of Immediate Liquidity.
- Business Risk. The company’s core business could decline or management could take actions that adversely affect the company. The net result is that the stock price could fall.
- Market Perception. The market may respond negatively to the merger, as in the case of Macrovision and Gemstar in which Macrovision’s share price fell 25% the day the merger was announced. The market may believe the purchase price was too high, the strategic fit was inappropriate or that the synergies cannot be realized. The merger could result in a lower share price for everyone.
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