Mergers and acquisitions-B Coursework Example | Topics and Well Written Essays - 2500 words

Mergers and acquisitions-B - Coursework usage be any Sell-Offs Likely? 10 7. Risk Given that the Majority of Takeovers Destroy Sh atomic number 18holder Value, What Are the Major Risks? 11 Conclusion 13 References 14 Introduction Evidences reveal that M&As send packing be quite risky to lead the pathway of the acquiring confederacys destruction and on the other hand, be highly beneficial to assist the company in the attainment of its semipermanent objectives. condescension the immense risk, companies opt for M&As in order to gain the benefits of operational leap, integration, larger guest base, channels and higher competencies (Galpin & Herdon, 2007). One of the most risky acquisitions in the recent past can be identify as the acquisition of National Westminster Bank (NatWest) by the Royal Bank of Scotland (RBS) in the social class 2000. It is recorded as one of the most daring acquisitions, due to the concomitant that during the period of acquiring NatWest, RBS was accepted to be smaller than the target company. It took a great effort from RBSs end to complete the mess hall and yielded it the reputation of one of the leaders in the British Banking Industry (Larsen, 2007). With this concern, the paper will examine the wide process of acquisition considering the various aspects, such as strategic fitness of NatWest, regulatory factors influencing the process, justification of the valuation of acquisition, defence tactics applied, implementation of integration and risks involved in the acquisition. 1. Strategy How Does The Target Company step forward To Fit into the Acquirers Long-Term Strategy? According to the experts, strategic fitness of the target company in M&A is considered to be one of the most significant aspects while determining the plan. Because, underneath every M&A the observed motive of the acquiring company or the merging companies are to increase the value of the two companies together which would be more than the sum of the total values of twain the companies. Strategic fit of the target company, thus, holds a significant position to increase the overall value of the acquirer (Lee & Pennings, 1996). The strategic fit of the acquisition and the target company can be analysed in depth considering the fact that M&As are often termed as a past of the strategic objective of the acquirer to attain growth and higher competency (Edinburgh Business School, 2008). The objective can be well identified in the acquisition of NatWest by RBS. It was a horizontal acquisition, which means that the target company and the acquirer belonged to exchangeable product line and also to a similar pagan background. This reduced the constraints in terms of cultural divergences. The prime objective of the acquisition depended on the fact that RBS was facing major difficulties in terms of diminish stock prices to approx 32% and required growth. Similarly, with an change magnitude competition and reducing market share led by the fa lling stock price and increased operational costs NatWest opted to go for an M&A in order to survive in the industry (Mahar & Polson, 2003). Being three times larger than RBS, NatWest was able to reward a higher market share and increased balance sheet value quite instanter after the acquisition with a paid bid of ?21 billion (NatWest, n.d). Subsequently, the stock price of RBS increased rapidly over the next two years (Mahar & Polson, 2003). Therefore, it is quite apparent that the acquisition proved to be a successful one in the short-term as well as in the long-term perspective. The market