Acquisition Accounting
advance accounting homework help please?
There are many acquisitions in business. Do you have some ideas on what the key ingredients are to make them successful and why many of them are not. Can you think of why some companies seem to do well with acquisitions? Are you familiar with Omnicom, Wells Fargo, Citigroup, Medtronic, Johnson & Johnson or Pfizer’s strategy in making acquisitions?
Relationship development is primary. After that, solvency within the acquisition target is key. That is, no acquiring company shows much interest for a target carrying loads of debt.
As for relationship development, there needs to be presented by the acquirer a tolerance for the standing company culture of the target – however not to forget commitments to the target’s management. Without the support of the target’s management, any attempt would likely have to go hostile. When that happens, it’s a crap shoot and the acquirer is likely to lose – and lose face.
Prevailing economic enviroment is also key, specifically within the target industry. If there is a glut of competition creating glut of supply, companies will be strained for revenues, thereby prompting willingness to merge. Or, if in a country facing an influx of large foreign firms, domestic firms will seek to merge in defense of local industry viability.
Acquiring companies likely need standing ownership of a healthy ratio of outstanding shares of the target. Ultimately, other shareholders must be convinced to sell. They will only do this if the price provides ample capital gain, and if developing relationships suggest preferential future investment opportunities.
Any of the companies you mention would have strategies to either shore up a product line they are already in (and eliminate competition), enter a product line in which they have lacked competitive influence, or diversify into another industry category as a hedge against economic trends that suggest an approaching tough period for hub business.
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