Reasons Why Corporate Acquisitions Occur and Fail Essay Example for Free

Reasons Why Corporate Acquisitions Occur and Fail Essay There are a number of reasons why a firm purchases another company. Mullins (2001) stated several of these reasons, one of which includes the most apparent and important reason—to increase profit and maximize its shareholder’s wealth. Elimination of competition is another reason to acquire a firm. Some companies acquire their competitors to reduce competition and improve its position in the market. However, acquisition for this purpose is against the law according to the antitrust acts. As a result, the acquiring firms emphasize in its press release that the acquisition is not anti-competitive but a way to better serve the customers. If the U. S. regulatory agencies, however, construe that the acquisition could be anti-competitive, the acquisition may be blocked. Company growth is also one of the reasons why acquisitions occur. Acquisition is also an approach used when the acquiring firm has excess cash which can be used for investments. To reduce corporate risk, firms also purchase another company which could result in improved earnings and sales stability. For instance, a clothing company specializes in swimwear while another clothing firm designs winter clothes. Thus, purchasing the swimwear company to gain profit during summer and spring is a good strategy to eliminate the sales instability of the winter clothing company caused by the changes in season. This example could also be used to illustrate another reason why acquisitions occur—to enter another market. The target firm’s experience and resources, including its employees’ expertise and business relationships, are readily available for the acquiring firm to take advantage of. Thus, rather than start a swimwear collection of its own, it would be much easier for the winter clothing company to acquire the swimwear company. A company’s resources could also be the target of the acquiring firm. These resources may be tangible (e. g. , plant and equipment), intangible (e. g. , trade secrets and patents), or talents of the target firm’s employees. Another reason cited for acquiring a firm is synergy, which is a term used to describe efficiency gained from doing more than one thing. For example, it is a good strategy for a meat processing company to acquire a leather goods manufacturer as they require the same raw material. Finally, acquisition occurs when the owners of a family-owned business wish to retire or leave the business and the next generation is not interested to continue the business (Mullins, 2001). In an interview conducted by Barnett (2004) for her article, Benoit shared another reason why acquisitions occur. He stated that acquisition allows the acquiring firms to get new clients. The escalating stock prices and reasonable interest rates were also considered as reasons for the increase in the number of acquisition deals (Flanagan, et al. , 2004). Even with these good reasons, many corporate acquisitions fail. A survey conducted by the KMPG reported that 83 percent of the acquisitions fell short of the forecasted plans (Lear, 2000). Additionally, in the book of Galpin and Herndon (The Complete Guide for Merging and Acquisitions, 2000), studies showed that only 23 percent of all acquisitions earn their cost of capital. In addition, the stock prices of acquiring companies rise only 30 percent of the time after an announcement of the acquisition deal. 70 percent of the cases observed also revealed that synergies projected for acquisition deals are unattained. â€Å"People† problems and cultural issues were also noted as the most cited reasons in failed integration (cited in Flanagan, et al. , 2004). Barnet (2004) and Lear (2000) agree with Galpin and Herndon’s findings which cite the clash of cultures of the two firms being combined could be a reason for acquisition failure if the integration is not facilitated well. Acquisitions fail when acquiring firms do not carefully consider and analyze the culture of the two firms being combined and their compatibility in areas like personality, work styles, integrity, and trust Barnett, 2004). References Barnett, S. (October 1, 2004). Mergers: its a culture issue; Most of the time, the reason behind the merger/acquisition is to reach new clients. The National Public Accountant. Retrieved October 27, 2007 from http://www. allbusiness. com/management/583960-1. html Flanagan, D. , et al. (2004). Merger and acquisition opportunities: due diligence activities offer internal auditors numerous opportunities to help ensure the success of proposed company integrations. Internal Auditor, August 2004, 55–59 Lear, R. W. (April 1, 2000). The artic1es of acquisition. The Chief Executive. Retrieved October 27, 2007 from http://findarticles. com/p/articles/mi_m4070/is_2000_April/ai_63609542/ print Mullins, G. E. (2001). Mergers and acquisitions: boon or bane? Central Wisconsin Economic Research Bureau. Special Report, Second Quarter. Retrieved October 27, 2007 from http://www. uwsp. edu/business/CWERB/2ndQtr01/SpecialReportQtr2_01. htm

Audrey Hepbrun: A Hollywood Fairytale Essay example -- essays researc

Outline I. Intro: Thesis- Audrey Hepburn took a difficult childhood and turned it into a gilded fairytale effortlessly. II. Family Life/Growing up: A-Shyness B-Turbulent family III. Suffering in Holland: A-Reasoning to return 1. Childhood in Holland B-"Aware of suffering and fear" IV. Dancing: A-Love of Dancing B-Chorus girl V. Getting into acting: A-Getting started 1. Acting surprise B-First movie role VI. Going to America: A-Can't act 1.Gigi rehearsals B-Audrey makes Hollywood VII. Miscarriage: A- 1st miscarriage 1. Another miscarriage 2. Miscarriage 1966 B-"Gift of God" VIII. Conclusion Audrey Hepburn: A Hollywood Fairytale. Christina Bremmerman Ms. Karyn B. Lentz Honors English 11 May 7, 2002 Bremmerman 1 Christina Bremmerman Ms. Karyn B. Lentz Honors English 11 May 7, 2002 Audrey Hepburn... ...out.("Audrey Hepburn Biography" 3). Even after miscarriages Audrey was still Bremmerman 6 the actress with a perfect life that everyone saw. Giving birth was her greatest feat, even greater than becoming a great actress. She achieved the one thing in life she had always wanted. After many hardships Audrey Hepburn's life changed to the better on the outside, she led the life everyone thought they wanted, but being the scenes she was still being faced with emotional misfortunes. She was a remarkable actress and she becomes even more remarkable as the conflicts of her life are revealed. Bremmerman 7 Works Cited "Audrey Hepburn Biography" [http://www.thefairestlady.com/audrey/printable.html]. May 8, 2002 "Hepburn, Audrey" Americana. 1987 Lavin, Cheryl. "Vital Statistics--Audrey Hepburn" St. Louis Post- Dispatch November 8, 1989 Warren, Jane. The Daily News Woodward, Ian. Audrey Hepburn. New York, St. Martin's press, 1984.

Mckinsey Report July 2012

Day of reckoning for European retail banking McKinsey report July 2012 The dynamics of the global banking sector have been in flux since the beginning of the 2008. Irate creditors everywhere have called for more stringent regulation to ensure that that the interests of financial institutions are more closely aligned with those of their customers and shareholders. The global, European and national authorities have responded with vigour and the regulatory reform to which all banks, wholesale and retail, will be subject in the coming years will have an important impact on their bottom line. The single biggest cause of a reduction in retail banks’ ROE will come from the global regulatory mechanism Basel III, which will place greater capital requirements on banks and more emphasis on adequate funding and liquidity. Furthermore, three important European regulatory instruments, the EU Mortgage Directive, the Markets in Financial Instruments Directive (MiFID II) and the Single Euro Payments Area (SEPA), Payment Service Directive, will also considerably diminish ROE. Finally, the implementation of new national regulation will create further downward pressure on ROE, though this will vary considerably from country to country. This report provides estimates on the impact on capital, revenues, costs and profit margins of all the relevant regulations on each product (both asset- and liability-based) in each of the four biggest European markets – France, Germany, Britain and Italy – which combined constitute 66% of the EU27 retail-banking market. ROE is the standard metric used and the report calculates the cumulative effect of all regulation as if it were all put in place immediately, using 2010 as the baseline year. The paper reaches some important conclusions. Firstly, with regard to national and continent-wide retail banking markets, ROE will fall from approximately 10% to 6% when all four markets are taken as a whole. Below is a breakdown of the effect in each of the national markets: Country France Germany Italy UK ROE Pre-Regulation 14% 7% 5% 14% ROE Post-Regulation 10% 4% 3% 7% Delta -29 -47 -40 -48 The impact in the UK is particularly caustic as national regulation is extensive. In terms of the effect of regulation on the different product offerings of retail banks, asset-based products are generally the harder-hit. In the UK and France, mortgages and small-business loans will be the most adversely affected. Similarly in Germany mortgages, personal and small-business loans will be the most negatively influenced. In Italy, the value of every asset-based product will be impaired. The disheartening truth of the matter is that across the board the ROE of asset-based products will fall below 10%, which is currently the estimated cost of equity for retail banks. On the other hand, liability-based products will prove more resilient. Deposits will become more valuable to retail banks as they are an advantaged form of funding and liquidity under new regulation. Geographically speaking, in France and Germany only investment products and debit cards will be negatively affected and in Italy most liability-based products will escape relatively intact. However, once again domestic regulation in Britain will play a role in reducing retail banks’ ROE, to the extent that all liability products in the UK will be adversely affected. An important section of the report discusses global systemically important financial institutions (GSIFIs). Such pecuniary establishments are considered too interconnected and universal to be subject to the new regulation imposed on smaller-scale retail banks. The Financial Stability Board has therefore proposed additional capital requirements for G-SIFIs, which will induce a further reduction of their ROE of anywhere between 0. 4 percentage points and 1. 3 percentage points depending on the institution. In addition, it will be obligatory for all G-SIFIs to prepare a recovery and resolution plan (RRP) that will provide a strategic map for authorities to wind down the bank in the event of dissolution. The Basel Committee on Banking Supervision (BCBS) is also developing new global rules on risk IT for G-SIFIs which are expected to be issued by the end of 2012. Such regulation will mean that these organisations will be subject to exhaustive supervision and many ad hoc requests, thus amplifying costs and absorbing management resources. The general conclusion of this paper is that it is improbable that banks across the board in Europe will return to pre-regulation ROE levels in the short to medium term. The UK will be particularly adversely affected due to its inflexible domestic regulation. Nevertheless, the paper proposes four mitigative measures retail banks can employ in order to cushion the blow of new regulatory forces on their ROE levels. The first is â€Å"Technical Mitigation†, which essentially involves improving efficiency of capital and funding. Secondly, â€Å"Capital – and funding-light operating models† seek to further improve funding efficiency and reduce risk-weighted assets (RWAs) by implementing changes to their product mix and characteristics and ensuring more vigorous pursuit of collateral and better outplacement of risk. Thirdly, and although they will be severely limited in doing so by regulatory authorities, banks can execute â€Å"repricing† in order to compensate the shortfall in ROE. The paper predicts more repricing in fragmented industries, which implies that the scale of repricing will be limited in the UK, a highly concentrated industry. Types of repricing include new fee-based pricing, modular pricing, partial performance remuneration and value-added packages. Finally, and perhaps most dramatically, financial institutions can engage in â€Å"Business-Model Alignment. Such restrategizing would involve two principle shifts. The first centres on a new, rigorous focus on ROE in retail banks, meaning greater investment in management systems and strengthening their resource allocation processes. The second important shift can be denoted as â€Å"Sustainable Retail Banking,† and comprises four key elements: expansion into new revenue sources, creation of advice for which customers w ill pay, reconfiguration and refocusing of the distribution system to render it leaner and simpler and cutting absolute costs by 20 – 30%. By exercising the above levers, retail banks can create a bulwark against the weight of new regulation and cushion the inevitable reduction in their ROE. Anticipatory forward-planning of mitigation measures is central in adapting to the new regulatory environment engulfing retail banking and will help banks that are fully committed to returning to pre-regulation ROE levels to achieve their post-regulatory reform potential.

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