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Sample Essay on Acquisition Pros and Cons

Sample Essay on Acquisition Pros and Cons

Knowing the acquisition pros and cons is very important because it enables a business to determine whether this is the best way to realize growth. The main importance of acquisition is to take advantages of synergies. If synergies that come with acquisition are carefully orchestrated, they will lead to more growth and profit for the business.

Although businesses realize growth faster and in less expensive means through acquisition, it is important to consider the pros and cons of the move. Weighing these pros and cons enables the entrepreneurs to make an informed decision.

Among the pros of acquisition include expansion of the business with ease. A business realizes faster expansion of operations through acquisition. It also helps in reducing competition because a business usually acquires another firm that is dealing in related operations. Thus, competition is greatly reduced which leads to faster growth and expansion in the specific field of specialization.

Another pro of acquisition is increased market impact and skills. During acquisition, a company acquires the experience and efficiencies of the other organization. This allows it to benefit from the core competencies that it did not have initially. The company also acquires the portion of the market that was dominated by the one that it acquires. Thus, apart from reducing the overall competition it also gets the share of the market that was initially dominated by the organization that it acquires.

The overall revenue is also increased through acquisition. This usually occurs after acquisition of the subsidiaries of the organization acquired that were initially operating in another market or if the acquisition leads to the creation of a markedly different service or product. A subsidiary can continue with its operations but the earnings will be going to the new mother company increasing its overall revenue.

Acquisition has downsides as well especially in terms of the price and costs of combing the similar companies. This is usually the case when board of directors is involved and they gauge market tangle accurately. During acquisition, the company value and stock might be worth a specific amount and then fall afterwards due to acquisition. The cost of supplier orders and business debts can also increase the cost of acquisition.

Acquisition can also involve a hostile takeover which can reduce the goodwill of the company and eventually result in losses of customers for the two companies. Many employees can also be fired due to redundancies and attempts to reduce costs which will cause disruption of the partnerships, company cultures and also loss of important talents.

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