Why Acquisitions are Popular
Acquisition a way of expanding by the act of buying 100% from another firm with the intend of controlling it. Acquisition is gaining population in the recent past. Several factors are responsible for the popularity. One of these factors is the ability to achieve or increase market power. The business of better marketing strategies or already it might have already existing distribution chain which the new business may use in accessing a wide range of customers. Assuming that the business in question has its own customers and then the new customers acquired from the business bought then the business will end up having enough customers which will give the business an increased market power. (Klaus, 1994)
Another cause acquisition popularity is the increased diversification, attained from the added variety of goods and services from the bought business one may use his/her distribution channels to sell these new variety of goods and services. In addition to what one had been selling before hence increased diversification of business products and services.
Businesses achieve reduction of development costs through sharing of ones costs of and increased ability to purchase. When these costs are shared, it helps the lowering of products and service costs. By lowering the costs of the products, many customers will be attracted to the business, since many customers prefer cheaper products. This will also help the business attain an upper hand over its opponents in competition.
Buying of workers, new property and products, makes it affordable for the buyer business and also takes shorter period than it would have taken the business to develop new ones. The owner of the business would have taken longer and a lot of money to create new workers, either by training or acquainting them to the business of losing money and customer by employing new workers unaware of the business operations.
It is also the best method used by any business to overcome obstacles of intruding into a new business. The struggles ones business might be going through in his/her business might be solved through adopting an already existing business since it is less challenging than developing an existing one internally. The business may learn so much from the business bought since it should systems that can work smoothly in ones business. Although acquisition has got so many benefits, it might face challenges or problems, it might face challenges or problems in acquiring the targeted results.
In cases where the operating systems of the business fail to match the managers may take a lot of time harmonizing both the systems and the workers. Again the workers in the target business might become very reluctant before the transactions are fully done since they feel threatened of losing their job is the need arises. The firm may also be depended on the target business for ideas and fail to make necessary changes in business improvement. Large debts, incurred by the company in adjustments may risk the firm of being and degrading of the firm credit rating- which may hinder the firm from accessing credit in future.
In conclusion, acquisition has gained popularity because of its benefits that out number the challenges. Another reason why acquisitions are popular is that, the challenges are not far reaching since with proper adjustment they can disappear. Its popularity can also be credited on its achievement in promoting businesses from the challenges of collapsing.
Klaus, M., (1994) Thinking in Complexity. Springer-Verlaag.