Week Acquiring another organization in the same industry may be the easiest of options. The strengths and weaknesses of each company get displayed for the new owners to view and grow as a greater power in the market. The get other channels of distribution and as a larger distributor they have more power with suppliers and pricing bargaining. They are able to keep smaller companies out of their marketing areas as they have a larger economic scale. They build synergies between the companies and are able to pay for acquisitions of new properties or companies with its shares and it has little or no liquidity problems.
The threat’s to acquiring another organization in the same industry is there may be duplication of efforts between the management and departments. ...view middle of the document...
Merging the two companies bring more bargaining power with suppliers, customers and distributors. The larger the two companies become the more money they have to invest in other ventures the owners feel may be profitable. They can improve the profitability and culture of the stores by restructuring and using the strengths of each of the two stores to gain more assets and customers.
The threats to this option are that the companies may be affected by anit-trust laws and become too large and monopolize the current market. The goals of each company may clash as the co-owners may differ in their approach to business scenarios, which may cause dissatisfaction between employees and they may leave the company in search of other opportunities. A fight for power may occur causing discord between the merging companies and often the shareholders of the companies veto the merger.
The final approach would be the IPO which would bring the owners of the company better economic stability. This option brings better liquidity to the shareholders and once the company has a market value it can be sold and resold multiple times. More esteem and prestige comes from the company going public and it also means greater capital for the company to invest.
The threats to an IPO are falling in prices and fluctuation in stock market may cause loss of confidence in stocks. These falling prices can cause suppliers and creditors to lose confidence in the company and withdraw products and supplies. Reviewing of the company by the United States Securities and Exchange Commission and decisions by the management can greatly affect the stock market prices. The SEC prerequisites are extensive, time consuming and expensive. The largest threat to taking the IPO option is the threat of a complete take over by other companies.