Merger and acquisitions have become part of important business initiatives of improving the performance of companies. Therefore, many factors are considered before deciding on which companies to merge with or acquire. The financial status of the company is one of these factors. The financial net worth of the company is important. Merging with or acquiring a company that is financially constrained has negative financial implications.
The other important thing to look at is the kind of products that the company is handling. If the line of products from the company either complements or supplements what the company deals with, then that would be a better choice (Gaughan, 2001). Therefore, the best choice for Apple incorporated as concerns merger or acquisition is Samsung. Samsung is a company that has heavily invested in stocks. It has a good record of financial performance. It deals in the same line of products as Apple. It has a good record of innovation and quality production (Hunt, 2009).
Mergers and acquisitions have been termed as being complex business processes. They have also been termed as risky business deals. Therefore, a company undertaking such a deal has to be careful and based on detailed analyses (Baker & Martin, 2011). In the case of an acquisition of Samsung by Apple Inc. Apple will have to get a trusted broker to help in facilitating the takeover of Samsung. Since this is a takeover, Apple will finance it using cash.
Apple has been making alit of financial returns from their sales. It can sustain a big part of the money needed in the takeover. The rest of the finances to support the takeover will be acquired through a loan from the bank. This could also be collected through the sale of bonds through bonds are usually affected by fluctuation in share prices at the security exchange (Hunt, 2009).
As mentioned earlier, mergers and acquisitions are risky transactions in business. For Apple, the second option for merging with could be a company that is not so strong in the industry though with assets. Motorola can be the best option here. Motorola is equally a well-known company that has been one of the competitors of Apple. In recent times though, the competitiveness of Motorola has declined with a reduction in the prices of its shares.
Therefore, the cost of a takeover will be low as compared to the acquisition of Samsung which is performing relatively well. Apple can also choose to merge and acquire a company that deals in supplementary products such as a software company like Oracle Corporation. This cold could be expensive to service, but the financial worthiness can be realized when the company is enabled to develop high-value software to support their products (Lee & Lee, 2006).
Through this assignment, I have grasped a number of important considerations in merger and acquisition exercises by firms. There has been a growing trend of merger and acquisition processes by firms. Companies have to hide to a number of factors before taking part in these processes. The most important factor in merger and acquisitions is the financial performance of both firms as it determines how the transactions will go.
The financial net-worth of the company that is being acquired is the basis on which the tag price for the takeover is calculated. In these transactions, companies choose between the two modalities of financing these functions, either cash or financing through the stock. Mergers and acquisitions can be successful, or they could fail. This depends on the strategies used and how they are implemented (McDonald, Coulthard and De Lange, 2006).
References
Baker, H. K., & Martin, G. S. (2011). Capital structure & corporate financing decisions: Theory, evidence, and practice. Hoboken, N.J: John Wiley & Sons.
Gaughan, P. (2001). Mergers and acquisitions: An overview. Web.
Hunt, P. (2009). Structuring mergers & acquisitions: A guide to creating shareholder value. Austin: Wolters Kluwer.
Lee, C. F., & Lee, A. C. (2006). Encyclopedia of finance. New York: Springer.
McDonald, J., Coulthard, M. and De Lange, P. (2006). Planning for a successful merger or acquisition: lessons from an Australian study. Journal of Global Business and Technology, 1(2), 1-11.