Question

Why do businesses decide to acquire other businesses and how do they decide to divest parts of their business? What are the risks and benefits of conducting business internationally?

Answer 1

A company that just to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of particular Industries performance on its profitability companies seeking to sharpen focus of an merge with companies that have a deeper market p********** Nikky area of operations.

The consolidation of companies or assets include a different number of transactions such as mergers acquisitions consolidations tender offer purchase of Assets and management acquisitions. There are some reasons why company much weight or acquire other companies-

Synergy the most used word is synergy which is the idea Darpan business activities performance with increase in cost will decrease essentially a business will attempt to merge with another business that has complementary strengths and weaknesses.

Sharpening business focus the two conflicting goals have been used to describe thousands of transactions a company that measures to diversify make a quiet another company in a seemingly unrelated industry in order to reduce the impact of particular Industries performance.

Growth- business acquire other businesses for company because an opportunity to grow market share is there without having to really on it by doing the work themselves instead they bhaiya competitive business for a price usually they are called horizontal mergers.

Increase supply chain pricing power bye bye out one of its suppliers or one of the distributors a business can eliminate a level of cost If a company buys out one of its suppliers it is able to save on the margins that the supplier was previously adding to its cause this is known as vertical Merger.

Eliminate competition - many deals allow the acquirer to eliminate future competition and gain a larger market share in its products market the downside of this is that a large premium is usually required to convince the target company shareholders to accept the offer it is not uncommon for the acquiring company shareholders to sell their shares and push the price lower In response to company paying too much for the targeted company.

Businesses decide to divest the parts of their businesses on the basis of the life of the assets remaining the amount of cost the asset is giving to the company in compared to another assets. The best is a partial awful disposal of a business unit through sale exchange closure or bankruptcy or Dee invention most commonly results from management decision to see zopper rating a business unit because it is not a part of core competency.

Companies need disinvest businesses that is not power of cooperation so that they can focus on their primary lines of business.

Companies of it undergo bankruptcy during their operating and financial problems and divestuture is almost always a part of this process when a healthy year company emerges out of bankruptcy.

Another common reason for substitute is to obtain funds this especially important for companies experiencing operating and financial difficulties.

Companies often disinvest to improve their bottom line stability.

A form of in breaks up into two or more companies to unlock value believe to be greater for separate entities than that of a consolidated company this especially important during liquidation.

Companies of India best parts of their business that are not performing up to their expectations.

Divestures sometimes happened for regulatory reasons such as antitrust concerned by regulator.

Risk and benefits of conducting business internationally are as follows

Benefits

1. Diversify risk the idea that a business realise so Lily on one market time directs all its resources into a single currency may prove to be more risky than it made first seem.

2. Grow your business when trading internationally the Universe of potential clients and suppliers will increase significantly just imagine increasing the number of potential clients by hundred percent each time one start selling in a new country in all likelihood this will probably be much easier than trying to expand your business place in your home country.

3. Early payments when working with companies Overseas both you and your customer will want to execute the transaction the safest and most efficient manner possible one of the many advantages when trading International is that Overseas pairs of an pay upfront this reduces payment risk.

4. Better margins as well as seeinh increased sales one may well Enjoy better margins.

5. Less competition the ability to stand out among competitors is a crucial factor in business when there are fewer competitors the task is made easy earn your business which may be viewed as comparible to others in UK may be placed in larger or more diverse environment.

Risks

1. Misunderstanding the local legal Framework it is dangerous to assume that laws in other countries are similar to that of UK the reality in laws differ in every country which means it is essential you spend sufficient time educating your company about the legal framework of the country you are doing business with identifying a local lawyer is a good ideas so that you can get a full picture of laws that will apply and which ones will affect your business.

2. Not spending enough time defining the risk of International Trade are you clear why you want to trade internationally are you aware of the risk what are the reasons you want to sell or buy from Overseas it is a crucial that you have a clear understanding of what international trade means and involves it is easy to become involved in the excitement of the benefits but should marginalised the risks.

3. Not computing effectively with your business partners relationships have to be worked at as there are always problems in emails that can be very easily mis understood time spent on the telephone and visiting will make life much more easier in the long term as you are likely to develop a rapport and gain a firmer.

4.0 unstable profits with so many aspects to consider with trading at an international level it is easy to leave currency exchange at the last minute unfortunately in doing so there is a risk of not getting the best exchange rate which in turn could have a negative impact on your business profit.

5. Not spending enough time with your potential business partners long distance relationship leave a lot to be desired to good friends of mine who have been buying goods from China and selling two number of countries for more than 5 years that than any of us wish to remember spend even now a huge amount of time upfront with their potential partners this is time very well spent as it has means they have developed some good partners and avoid it some very bad characters along the way