ACQUISITION PLANNING

Acquisition Planning



Acquisition Planning

Introduction

Ambiguous language in contract of acquisition can be very challenging for the organization. It can lead to huge losses in monetary terms and in the overall image of the parties. The quest for the affects of ambiguous language in acquisition contracts is a key element in the interpretation of the contract. In other words, we interpret the contract so that it is effective use to interpret the contract as to the extent that the civil code recognizes that what is ambiguous is interpreted by what is customary in the country where the contract is placed. The final rule (the use of rationality) which is reported is judge-made law. It is recognized that rational considerations may contribute to the interpretation of an ambiguous contract.

Discussion

An acquisition occurs when one organization or firm establishes itself as an entity by taking over another firm through making a successful purchase deal. If looked at it from a legal perspective, the buyer or the purchaser of the company “gulps” down the business and the stock of the buyer is constantly traded while, the target company stops to exist and all its functions come to a halt.

On the other hand, a merger takes place when the two companies, instead of continuing as two separate firms, agree to go ahead as a new single company by merging into each other. Sometimes, this sort of process is known as the “merger of equals". In such activity, often, the firms are of the same size, nature and scope. Once the merger has taken place, the stocks of both the companies are surrendered and the company issues its own stock.

However, if we look at it with the practical aspects, there is not much frequency that the actual acquisitions would happen. Usually, it is an acquisition where one company buys another and allows the acquisition. However, in other terms, if the CEOs of both the companies feel that both firms would be benefited by joining together, then this purchase deal would also be called a merger. Only in the case of an unfriendly purchase deal, it is called an acquisition.

Firms use acquisitions to penetrate into new markets and new geographic regions, gain technical/management expertise and knowledge, or allocate capital. Even though business organizations often utilize corporate acquisitions strategically in order to survive and grow, many poorly understood and managed acquisitions result in failure (up to 50 percent).

Acquisitions are one of the most frequently selected instruments for growth for U.S. corporations. Systematic corporate acquisitions research can help to investigate acquirers' pre-acquisition understanding and post acquisition performance. However, Sirower (1997) emphasized the lack of clear understanding of how to maximize the probability of success in acquisition programs despite a decade of empirical research. Understanding the sources and/or determinants of value creation or value loss is vital to comprehending the causes of success or failure of corporate acquisitions.

A popular roll up technique has been the use of initial public offering (IPO); however, since many consolidators taken the IPO ...