Question

identify three factors that would discourage you from selecting a target company to acquire or partner with and why these factors are likely to work against a merger or acquisition.

Answer 1

Acquiring or becoming a partner of a company requires so many things or factors to be considered. After evaluating all those, the final decision must be taken.

Factors are as below:

No.1) Legal issues and suitcases: This is to be seen first whether the target company faces any legal issues like, conflict with the government, cheating with shareholders, and internal disagreements. If these are there takeover is not recommended, because after such takeover the acquired company also has to involve with this and may be liable immensely.

No.2) Competitive advantage: The acquiring company has to calculate how much competitive advantage is there if the takeover is on. Short-term benefit would be the key in such acquisition. If a huge price has to be paid (because of high competition) with a small market share in future, then the decision of takeover should not be implemented; rather, the company should wait for a down market.

No.3) Employees and trade union issues: This is another case of discouraging acquisition. The acquiring company must have liberty in new recruitment, employment offers, and terminations. If these are not expected because of trade union pressure, takeover should not be done.