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Post Module Assessment
Student’s Name
Course Title
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Date
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Table of Contents
Abstract …………………………………………………………………………………………………………………………………….. 3
Introduction ………………………………………………………………………………………………………………………………. 4
Literature Review ……………………………………………………………………………………………………………………… 4
Benefits and Risks of a 100% Acquisition ………………………………………………………………………………… 5
Benefits………………………………………………………………………………………………………………………. 5
Risks ………………………………………………………………………………………………………………………….. 6
Benefits and Risks of a 50-50% Collaborative Venture …………………………………………………………….. 6
Benefits………………………………………………………………………………………………………………………. 6
Risks ………………………………………………………………………………………………………………………….. 7
Chosen Way Forward ……………………………………………………………………………………………………………….. 8
Financial Factors …………………………………………………………………………………………………………. 8
Reputation ………………………………………………………………………………………………………………….. 8
Branding …………………………………………………………………………………………………………………….. 8
Risk of Unfriendly Take Over ……………………………………………………………………………………….. 9
Loss of Intellectual Property …………………………………………………………………………………………. 9
Law and Jurisdiction ……………………………………………………………………………………………………. 9
Acquisition Process …………………………………………………………………………………………………………………. 10
Risks from Acquisition and How to Mitigate Them ………………………………………………………………… 11
Paying in Excess for the Target Firm ……………………………………………………………………………. 11
How to Avoid Spending too Much on the Target Business ……………………………………………… 11
Synergies are often Overestimated ……………………………………………………………………………….. 12
How to Keep Synergies from being Overestimated ………………………………………………………… 13
Gaps in Integration (Risk of Merger and Acquisition Integration) ……………………………………. 13
How to Prevent the Most Common Merger and Acquisition Integration Blunders …………….. 13
Setting Up the New Joint Purchasing Department …………………………………………………………………… 14
Corporate Identity to Be Used ……………………………………………………………………………………… 14
Maximizing the Combined Organization’s Power ………………………………………………………….. 16
Clause Titles for a New Set of Corporate Terms and Conditions that will be Utilized with All
Suppliers …………………………………………………………………………………………………………………… 17
Conclusion………………………………………………………………………………………………………………………………. 18
Reference ………………………………………………………………………………………………………………………………… 19
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Abstract
Union United Kingdom Limited (“Union UK Ltd”) is a British vehicle manufacturer
specializing in cars of various models such as; SUVs, saloon and estate cars, and small-medium
trucks. Union UK Ltd sells to the United Kingdom (UK), the majority of the European Union
(EU), and a few North African countries. Its distribution mechanism is entirely reliant on thirdparty vendors. It wants to grow into Asia. After months of investigation, it discovers HK Carz
(HK), a Hong Kong-based car manufacturer with market offerings similar to, but not identical to,
its own. Through its wholly-owned distributors and third-party distributors, HK Carz has
extensive distribution capabilities in numerous Asian nations. Union UK Ltd is in advanced talks
with Hong Kong’s owners, Finbar Investments, a Chinese private equity firm, to buy the entire
city-state through a program known as the share purchase program. Not only does Finbar want to
sell all its stock, but it is also open to talks with Union UK Ltd about a 50/50 venture
This article compares both the risks and advantages of a 100 percent acquisition to that of
a 50/50 joint venture, and a recommended option is determined based on the findings. Financial,
reputational, branding, hostile takeover risk, intellectual property loss, legislation, and
jurisdiction have all been considered at a minimum in this research. Furthermore, the essay
identifies the most crucial milestones in the purchase process. It also critically assesses three of
the most important legal or business risks associated with the recommended course of action.
Additionally, assess why the identified risk poses an obstacle to the acquisition and discuss how
they can be mitigated. It then goes on to explain how to set up the new department for joint
purchasing.
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Post Module Assessment
Introduction
A joint venture is an agreement between two or more people or businesses to share
earnings, losses, and costs to achieve a common goal. On the other hand, an acquisition is a
transaction in which one firm buys another (Stienstra & Martin, 2017). All rights and duties,
together with the ownership of the assets and liabilities, are transferred to the purchasing firm
while making a stock purchase. This essay discusses the benefits and risks of joint venture and
acquisition processes and critically analyzes what Union UK Ltd should do to acquire HK Carz
successfully.
Literature Review
Both a joint venture and acquisition come with benefits and risks (Stienstra & Martin,
2017; Barner, King, Schriber & Kruckenhanser, 2021: Chen, Lin, Luo & Shao, 2021, pg233).
During an acquisition process (Zawaideh et al., 2018; Kang, Nantharath & Hwang, 2020), the
buying business is susceptible to several risks, such as overpaying the selling firm and
overestimating the synergies(Lewis &Bozs, 2019, Pavicevic & Keib, 2021; Nguyen et al., 2021).
In addition, a business may face challenges such as culture incompatibility, hostile take over
(Belayeva, Danilova & Uskov, 2021), and loss of intellectual property (Keshavarzi, 2021; Yang,
2021). If the acquisition takes place between two businesses in different geographical locations,
law and jurisdiction are important factors to consider (Yu-Hsin, 2019).
Setting up a purchasing department after an acquisition is very important. The company
in question should develop a corporate identity to be used with suppliers(Flint, Signori &
Golicic, 2018; Michaels & Gruning, 2018; Kashyap, Lakhanpal, 2019). With proper planning
and management, an acquisition can prove to be a profitable business strategy. The acquiring
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business should devise ways to maximize the combined power f the acquisition (Rennneboog &
Vansteenkiste, 2019, pg 653; Michaels & Gruning, 2018). It is, therefore, the responsibility of
the acquiring business to conduct intense evaluation and research on the company it hopes to
acquire. It will help in strategically coming up with plans to ensure maximum prioritization of
the acquisition.
Benefits and Risks of a 100% Acquisition
Benefits
Union UK Ltd may now penetrate new markets and product lines in Hong Kong and Asia
as a whole, thanks to the acquisition of a well-known brand with a solid reputation and a devoted
client base. As a result, it will assist in overcoming challenging barriers in market entry.
Expenditures concerning market research and new product development make market entry
costly. It is also time-consuming due to the time used to develop a large client base. Therefore,
the acquisition will hasten entry into the new market. Furthermore, the acquisition may rapidly
expand Union UK Ltd’s market share (Bauer, King, Schribber & Kruckenhanser, 2021). Even
though the competition is strong, growth through acquisition can help a company gain a
competitive advantage by facilitating market synergy.
Union UK Ltd will also benefit from new skills and resources and gain new resources
and skills it does not have by buying other companies with what they need. Various benefits are
acquired, such as better long-term financial status and increased revenue, making obtaining
funding for expansion initiatives easier (Chen, Lin, Luo & Shao, 2021). A company’s expansion
and diversification can also help it withstand a downturn in the economy. Union UK Ltd will
also profit from the acquisition of HK Carz in terms of cash availability. A company’s access to
capital improves after an acquisition as it aims to grow larger. Consequently, small firm owners,
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like HK Carz, are occasionally forced to redirect their own funds in expansion as they cannot
secure large loan capital (Chen, Lin, Luo & Shao, 2021, pg 233). However, after an acquisition,
business owners are able to receive funds and not dive into their pockets due to the availability of
large amounts of capital.
Risks
The culture of a corporation is usually distinct and has evolved. Acquiring HK Carz
could be a problem if the two companies’ cultures are mismatched. Employees and supervisors
from both organizations and their activities may not blend as well as they should. Employees
may dislike the change, causing anger and anxiety. Employees’ tasks may also be duplicated as a
result of acquisitions. Workers and departments end up doing similar jobs if two similar
companies merge. Consequently, this leads to extensive wage expenditure in excess. As a result,
the acquisition may necessitate reorganization and job cuts to improve efficiency (Chen et al.,
2021, 254). Layoffs, on the other hand, may have a negative impact on employee morale and
productivity.
Furthermore, the acquisition may result in incompatible goals. This is because these
companies had operated differently towards different objectives. A good example is when Union
UK Ltd intends to venture into new markets. Still, HK Carz wants to reduce its operating cost,
thus jeopardizing development by creating a situation of internal resistance.
Benefits and Risks of a 50-50% Collaborative Venture
Benefits
A major benefit of joint ventures is that it helps a company to grow rapidly by increasing
productivity and profitability. Both companies will benefit from new market access and
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distribution channels (Leonard, Pakpahan, Heriyati & Handayani, 2020, pg 339). HK has extensive
distribution capabilities in numerous Asian nations, while Union UK Ltd’s distribution mechanism
relies entirely on third-party distributors through its wholly-owned distributors and third-party
distributors. Also, the joint venture guarantees expanded capacity risk and cost-sharing (i.e.,
liability). It also gives partners access to new knowledge and capabilities, such as specialized
people, and additional resources, such as technology and financing.
Similarly, these Joint ventures facilitate business growth without necessarily borrowing
funds or acquiring other investors. Union UK Ltd will benefit by selling its products to the client
base offered by HZ Cars. It will also offer its existing clientele the services and products of its
partners and join forces in purchasing, research and development, and other areas. Flexibility is
also another benefit of forming a joint venture. In this case, the joint venture can be for a period or
cover only a particular section. As a result, either company’s commitment to the other and the risks
involved are reduced.
Risks
Partner conflicts and disagreements are among the biggest challenges facing joint
ventures. Lack of proper communication in giving requirements and aims of the venture often
leads to these clashes. At times, Discord can also arise as a result of different expectations either
parties have when forming the venture. Additionally, the available resources such s skills,
talents, and investments are not evenly distributed among the parties, and this causes conflicts
(Leonard et al., 2020, pg 341). Cultural and management differences also complicate
cooperation, and contractual limits may imperil a partner’s vital economic activities.
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Chosen Way Forward
After considering the benefits and risks of an acquisition and a joint venture, it would be
a more feasible and profitable decision if Union UK Ltd went through with pushing for the 100%
acquisition. This decision has been arrived at after analyzing different issues of the acquisition
listed below.
Financial Factors
One of the most significant advantages of purchasing another firm that sells similar goods
or services is that it may take advantage of economies of scale, increasing output while lowering
pricing. When a company opens a second location, it may employ the same marketing and sales
strategies as the first, cutting costs and improving output. Union UK Ltd will gain a new
audience as well hence expanding its market and increasing its profitability.
Reputation
HK Carz has already built its reputation as a reliable vehicle dealer in Hong Kong. After
the acquisition, Union UK Ltd may decide to keep the HK Carz brand intact not to disturb the
existing market dynamics. Using an already existing brand cut down on the threats to entry in a
new market by a wide margin.
Branding
Immediately after the buyout, Union UK Ltd should maintain the HK Carz brand to ease
the transition process. It could then slowly work its way into creating a merged brand in the most
seamless of ways. By doing this, Union UK Ltd will buy itself time to capture the Hong Kong
market and prove its credibility without causing much of a stir.
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Risk of Unfriendly Take Over
Both Union UK Ltd and HK Carz are responsible for developing takeover strategies that
will not jeopardize productivity, employees morale, and the general brand of both companies. A
seamless transition will help Union UK Ltd gain ground in Hong Kong and use HZ Carz’s
reputation and brand to establish its Hong Kong markets (Belayeva, Danilova & Uskv, 2021). A
hostile takeover could easily result in disgruntled shareholders and employees, leading to
massive losses and rendering the acquisition inconsequential.
Loss of Intellectual Property
Before the acquisition, both parties should discuss all the intellectual property involved.
HK Carz must have an exhaustive list of every Intellectual Property (IP) (and accompanying
paperwork) material to the business ready for Union UK Ltd’s scrutiny. IP licenses and other IPrelated agreements frequently include conditions requiring the other party’s consent to the selling
company’s change of ownership or assignment of the agreement (Keshavaezi, 2021, pg 230).
The acquisition transaction’s structure frequently determines the extent to which such approval is
required. An asset sale arrangement will almost always necessitate third-party approval (Yang,
2021, pg 297). Whether third-party approval is required for a sale of the selling business’s stock
or a merger involving the selling company, on the other hand, will necessitate a thorough
examination of the contract language as well as relevant case law.
Law and Jurisdiction
Companies such as the Securities and Futures Ordinance, which controls the securities
and futures, are mong the laws and legislation governing mergers and takeovers in Hong Kong.
The Codes and Listing Rules concerning share buyback, mergers, and takeovers are under the
mandate of the executive director of corporate finance (Yu-Hsin, 2019, pg 11). To avoid being
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on the wrong side of the law, Union UK Ltd officials should be well-versed in Hong Kong
takeover and mergers laws.
Acquisition Process
Acquisition analysis is subdivided into three steps, namely; Screening, Search, and
planning. The planning process is conducted by examining product-market strategy and
objectives for key strategic business units, which is the first phase (Rodriguez-Sanchez, MoraValentin & Urtiz-de-Urbina-Criado, 2019). The purchasing corporation should state its possible
directions for diversification and expansion of the corporate in terms of the strengths and
constraints. Additionally, it should offer an appraisal stating technological, political, social, and
economic environment. Specified criteria used in determining the findings of this study usually
include parameters in the industry, the regulation, capital versus labor intensity, and market
growth rate (Zawaideh et al., 2018, pg 153). Other factors included in the criteria list include
profitability, size, share, quality management, and capital structure.
During the search and screen technique, it is carried out in a strategic manner to try and
generate a list of good acquisition candidates. The main objective of this search is to identify
ways to locate the required personnel. Simultaneously, the screening process selects the best
candidates among the applicants depending on the criteria specified in the screening process.
Finally, the financial appraisal method, which is the focus of this essay, is implemented. The
acquiring company and the applicant evaluation are included in the financial review procedure.
As much as it is possible to do a target company evaluation without in-depth self-examination,
this is often the most advantageous technique (Kang, Nantharath & Hwang, 2020, pg58).
Corporate self-evaluation will have to vary in extent and detail depending on the needs of each
organization.
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Acquiring firms frequently utilize the market value of the transferred shares to establish
the purchase price for an acquisition. This strategy is inefficient, and it has the potential to
deceive and cost the purchasing organization money. Accurate valuations of both the buying and
selling corporations are required for well-planned exchange-of-shares acquisition research. If the
acquirer’s management believes its stock is undervalued in the market, calculating the purchase
price could result in the firm overpaying or earning less than the minimum acceptable rate of
return (Oh & Jhnston, 2020). On the other hand, when overvaluing its shares, pricing at the
market prevents the possibility of availing extra shares to shareholders and still achieves a
minimum acceptable return.
Risks from Acquisition and How to Mitigate Them
Paying in Excess for the Target Firm
When paying in excess for the company, the value that the shareholders have is reduced.
According to Forbes and other research, it is difficult to create value for shareholders between
70-90 percent, which is the case with most acquisitions. Overpaying for a company is one of the
most major risk factors surrounding mergers and acquisitions today (Chen et al., 2021). Because
many corporations have recently overpaid for other businesses, this highlights the problem of
insufficient valuation systems.
How to Avoid Spending too Much on the Target Business
First and foremost, concentrating on a company’s overall strategy and broad aims is
critical in laying a foundation to avoid overpayment. There are a few essential questions that will
guide Union UK Ltd in its acquisition endeavor. Why is it so eager to complete this transaction?
What are its primary objectives? Are there any other options for achieving these objectives
besides acquisitions? Next, whether the organization completes its appraisal or pays someone
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else to do it, it is a good idea to provide a detailed valuation report (Lewis & Bozos, 2019). Each
case should collect critical business facts regarding the desired outcomes to arrive at a more
realistic and appropriate price. Some of the most valuable information for a business include
financial information for a period not less than five years, tax returns, personnel count,
agreements from the stakeholders, and a detailed overview of the organizational structure, to
name but a few.
It is vital to regard the computed proper price as a limit rather than a starting point when
studying the previous facts and valuation report; this generates a strong shift in thinking that
leads to paying the correct price for a target. Finally, it is crucial to check a company’s ego,
especially when determining appropriate transaction pricing. Egos usually run high during the
making of deals or when deliberating a target, which causes good business judgment to be
forsaken or ignored.
Synergies are often Overestimated
There are synergies to be found. It is just that they are not the all-in-one solution that
many acquiring executives believe they are. Synergies are commonly presented as the sole
justification for acquisition, whereas they should be just one of several factors to evaluate.
According to McKinsey management consultations’ research, about one out of four managers
overestimates the post-deal synergies by a margin of about 25%. If the deal succeeds through
scop and scale, joint distribution, intellectual property, best practices, potential, and working
personnel, these executives often envisage synergies across the board (Chen et al., 2021, 235).
This lack of concentration means a company risks not having any synergy money if it tries to
generate them everywhere.
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How to Keep Synergies from being Overestimated
When it comes to deal synergies, companies are advised to become conservatives which
is crucial in controlling the outcome of the dealings. There are various tools, such as the
valuation spreadsheets and the Merger and Acquisition (M&A) management platforms, which
companies can utilize in efforts to determine synergies (Pavicevic & Keil, 2021, pg 1698). Once
it has computed its synergies, it should divide the total by two to keep deal synergies minimum.
Gaps in Integration (Risk of Merger and Acquisition Integration)
The most difficult component of every transaction, according to M&A professionals, is
post-merger integration. There are many challenges that companies have to endure and
overcome, ranging from Salesforce integration to internal management audits, which present
significant risks, such as inability to realize synergies, employee dissatisfaction, and, ultimately,
loss of value. Furthermore, there can be significant disparities in scale between each integration
process, which exacerbates the risks. Integrations are considerably more difficult because culture
is not always obvious because of adopting the most important part (Bauer et al., 2021). Lastly,
these considerations can be used to evaluate how dangerous it is to venture into the integration
process.
How to Prevent the Most Common Merger and Acquisition Integration Blunders
Having team members join the integration team is practically considered the first logical
step towards strengthening the M&A. This ensures that information is uniform and streamlined,
reducing the amount of time, effort, and resources spent on undertaking redundant tasks.
Additionally, the diligence team should include individuals who have a deep understanding of
value and quality production matters. Players with strong Independent Market Organization
(IMO) and project management skills should be included on the team (Nguyen, Zhu, Jung &
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Kim, 2021). Finally, preferably from Union UK Ltd’s organizational development department,
Human Resource (HR) will be part of the integration team. When you have an integrated team
comprising talented and experienced individuals in place from the beginning, it is easier to keep
a close check on integration plans as new insights and a deeper understanding of the target
organization emerge during research.
Setting Up the New Joint Purchasing Department
Before choosing to combine or purchase another company, the procurement department
should be called in to assess cost-cutting opportunities during the due diligence process. It
permits executives to talk about the reasons for the merger and evaluate procurement’s role. The
most important reason to incorporate procurement early on is to reduce risk.
Corporate Identity to Be Used
The term’ corporate identity has a wide range of meanings and depths in literature. In
practice, there is a high degree of non-uniformity in applying this phrase, which has evolved due
to varied interpretations and modifications in the term’s definition. Dimension and complexity
span from a narrow definition as a design concept, to an understanding of the phrase as a
communication/marketing strategy, to a synonym for a holistic concept for strategic business
leadership (Flint, Signori & Golicic, 2018, pg 70). As a result, in addition to the pure conceptual
definition, the basic phrase will be clarified by depicting the important instruments and
components.
Customer Intelligence (CI) is a Corporation’s Internal and External self-representation
and the potential for stakeholders to use their imagination. To express a scale for the emotion of
“wanting to belong to” or “delimitation,” each organization must have a clear understanding of
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its mission. Even if anxiety and exposure are considered among the key criteria, identification
must be more than a catchphrase, a logo, or a slogan. CI must also be livable. Corporate identity
is divided into three categories of effect: internal effects, outward effects, and superior effects
(Michaels & Gruning, 2018). Naturally, one of the goals of a corporate merger is to establish
conditions that allow the merger’s goals to be met.
The development of a Credit Points (CP) that satisfies the current and future expectations
of the corporation and the environment and their realization within the organization is required
for the configuration of CI. While the demands explain the desired aims, values, and norms, the
culture, created by the past, encompasses all of the company’s attitudes toward values, norms,
standards, and behavior patterns and symbols (Flint et al., 2018). As a result, there is a zone of
tension between the lived ‘is identity’ and the striven ‘shall-state.’
The most conservative way of corporate branding is to make no modifications to a
company’s brand. Union UK Ltd brand is kept. However, this does not necessarily imply that the
HK Carz brand is self-contained, as the market understands it. In mature categories, the No
Change strategy works best when two brands are mutually exclusive, and no plans of either
brand will affect the other. No Change is common in the consumer packaged goods industry
when brands are marketed to appeal to various sectors in the same category. This strategy can
help the team members, particularly the ones who built the acquired brand, feel valued by
expressing continuity to stakeholders (Michaels & Gruning. 2018). Because HK Carz already has
a supply system in place, it will be especially significant in the purchasing department.
Rebranding right away would be more expensive and time-consuming.
The No Change strategy’s ‘business as usual approach, on the other hand, causes the lack
of actual or perceptual integration. Operational synergies could be missed due to a lack of
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perceptual and actual synergies. To justify the acquisitions and mergers, companies would most
likely include some efficiency level by gathering strengths that are often disguised if the go-to
brand fails (Michaels & Gruning, 2018). The justification for the merger or acquisition most
likely includes some level of efficiency and gathering strength, which will be disguised (at least
in public) if the go-to-market brand fails. Therefore, Union UK Ltd should approach this strategy
carefully and intellectually to mitigate any problems from the No change approach.
Maximizing the Combined Organization’s Power
A merger is an excellent moment to investigate digital supply chain investments in
collaboration, blockchain, machine learning, and technology platforms that improve procurement
skills. It is easier to conduct due diligence if both firms have category plans, which detail what
the departments want to do with its facilities, travel, and other areas in the next years (Alaaraj,
Mhammed & Bustamam, 2018). When plans are in place, comparisons can be made, allowing
assessments to progress more swiftly and precisely. Reviewing the contracting clauses before the
merger is vital (Rennebog & Vansteenkiste, 2019, pg653). Many businesses are not very
sophisticated in contracting if corporations cannot get out of contracts during the merger because
it would be nearly impossible to change supplier bases.
In order to maximize commercial leverage and cut costs, Union UK Ltd can use the same
parts in Union UK Ltd and HK automobiles. Also, Union UK Ltd can use its access to HK’s
third-party distributors and HK’s distribution outlets to increase its target audience. It can also
use spare production capacity in the UK to produce HK automobiles and vice versa. By sharing
technical knowledge between companies about their vehicle system designs, Union UK Ltd can
comply with local safety regulations.
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Clause Titles for a New Set of Corporate Terms and Conditions that will be Utilized with
All Suppliers
The use of a contract to document the transaction ensures that both firms and suppliers
take the relationship and obligations seriously. It includes significant dates such as the delivery
of products and services and deadlines for making timely payments. These agreements are also
useful when establishing a manufacturer/supplier and distributor relationship (Kashyap &
Lakhanpal, 2019, pg 49). A company designs a new product and employs a firm to manufacture
it before releasing it to the general market.
Depending on the industry and items provided, the terms and clauses of the agreements
fluctuate. The contract contains a significant amount of confidential information. A
confidentiality agreement ensures that a company’s trade secrets and formulations are not shared
with the manufacturer or distributor. The contract’s secrecy clause provides this protection. It is
also crucial to include a provision about where things are sold. The security of the business
concepts is a major plus (Kashyap & Lakhanpal, 2019, pg 49). Even if there are no worries
about confidentiality, Union UK Ltd should nonetheless utilize an agreement. If Union UK Ltd
does not want a supplier distributing vehicle parts to other companies, it may impose restrictions
on the arrangement.
The agreement must also incorporate regulatory requirements and liability terms.
Essentially, the agreement must cover all aspects of a company’s manufacturing. These contracts
are used by a wide range of businesses and sectors. They all have one thing in common: one
party develops items for the other, while the other sells the products. The manufacturing party is
hired to make a certain number of products or supply services within a certain time frame. A
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company cannot effectively limit risk until it understands and implement the fundamentals of
supplier management.
Conclusion
A joint venture or an acquisition can be a profitable business move if properly planned
and executed. However, both strategies are not without their shortcomings. Therefore, a business
should conduct intensive research before making such a huge business decision.
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OUTLINE
Topic: Global Business
Thesis: This essay discusses the benefits and risks of joint venture and acquisition processes and
critically analyzes what Union UK Ltd should do to acquire HK Carz successfully.
I.
Table of Contents
II.
Abstract
III.
Introduction
A. Background
B. Thesis Statement
IV.
Literature Review
V.
Benefits and Risks of a 100% Acquisition
A. Benefits
B. Risks
VI.
Benefits and Risks of a 50-50% Collaborative Venture
A. Benefits
B. Risks
VII.
Chosen Way Forward
A. Financial Factors
B. Reputation
C. Branding
D. Risk of Unfriendly Takeover
E. Loss of Intellectual Property
F. Laws and Jurisdiction
VIII.
Acquisition Process
IX.
Risks from Acquisition and How to Mitigate Them
X.
Setting up New Purchase Department
A. Corporate Identity
B. Maximizing the Combined Organization’s Power
C. Clause Titles for a New Set of Corporate Terms and Conditions that Will be
Utilized with All Suppliers
XI.
Conclusion
XII.
References
Please view explanation and answer below.
1
Post Module Assessment
Student’s Name
Course Title
Institutional Affiliation
Professor
Date
2
Table of Contents
Abstract …………………………………………………………………………………………………………………………. 4
Introduction ……………………………………………………………………………………………………………………. 5
Literature Review……………………………………………………………………………………………………………. 5
Benefits and Risks of a 100% Acquisition …………………………………………………………………………. 6
Benefits………………………………………………………………………………………………………………………. 6
Risks ………………………………………………………………………………………………………………………….. 7
Benefits and Risks of a 50-50% Collaborative Venture ……………………………………………………….. 7
Benefits………………………………………………………………………………………………………………………. 7
Risks ………………………………………………………………………………………………………………………….. 8
Chosen Way Forward ……………………………………………………………………………………………………… 9
Financial Factors …………………………………………………………………………………………………………. 9
Reputation ………………………………………………………………………………………………………………… 10
Branding …………………………………………………………………………………………………………………… 10
Risk of Unfriendly Take Over ……………………………………………………………………………………… 10
Loss of Intellectual Property ……………………………………………………………………………………….. 10
Law and Jurisdiction ………………………………………………………………………………………………….. 11
Acquisition Process ……………………………………………………………………………………………………….. 12
Risks from Acquisition and How to Mitigate Them …………………………………………………………… 13
Paying in Excess for the Target Firm …………………………………..Error! Bookmark not defined.
How to Avoid Spending too Much on the Target Business ……………………………………………… 14
Synergies are often Overestimated ……………………………………………………………………………….. 14
How to Keep Synergies from being Overestimated ………………………………………………………… 15
3
Gaps in Integration (Risk of Merger and Acquisition Integration) ……………………………………. 15
How to Prevent the Most Common Merger and Acquisition Integration Blunders …………….. 16
Setting Up the New Joint Purchasing Department …………………………………………………………….. 16
Corporate Identity to Be Used ……………………………………………………………………………………… 16
Maximizing the Combined Organization’s Power ………………………………………………………….. 18
Clause Titles for a New Set of Corporate Terms and Conditions that will be Utilized with All
Suppliers …………………………………………………………………………………………………………………… 19
Conclusion …………………………………………………………………………………………………………………… 20
Reference …………………………………………………………………………………………………………………….. 21
4
Abstract
Union United Kingdom Limited (“Union UK Ltd”) is a British vehicle manufacturer
specializing in cars of various models such as; SUVs, saloon and estate cars, and small-medium
trucks. Union UK Ltd sells to the United Kingdom (UK), the majority of the European Union
(EU), and a few North African countries. Its distribution mechanism is entirely reliant on thirdparty vendors. It wants to grow into Asia. After months of investigation, it discovers HK Carz
(HK), a Hong Kong-based car manufacturer with market offerings similar to, but not identical to,
its own. Through its wholly-owned distributors and third-party distributors, HK Carz has
extensive distribution capabilities in numerous Asian nations. Union UK Ltd is in advanced talks
with Hong Kong’s owners, Finbar Investments, a Chinese private equity firm, to buy the entire
city-state through a program known as the share purchase program. Not only does Finbar want to
sell all its stock, but it is also open to talks with Union UK Ltd about a 50/50 venture
This article compares both the risks and advantages of a 100 percent acquisition to that of
a 50/50 joint venture, and a recommended option is determined based on the findings. Financial,
reputational, branding, hostile takeover risk, intellectual property loss, legislation, and
jurisdiction have all been considered at a minimum in this research. Furthermore, the essay
identifies the most crucial milestones in the purchase process. It also critically assesses three of
the most important legal or business risks associated with the recommended course of action.
Additionally, assess why the identified risk poses an obstacle to the acquisition and discuss how
they can be mitigated. It then goes on to explain how to set up the new department for joint
purchasing.
5
Post Module Assessment
Introduction
A joint venture is an agreement between two or more people or businesses to share
earnings, losses, and costs to achieve a common goal. On the other hand, an acquisition is a
transaction in which one firm buys another (Stienstra & Martin, 2017). All rights and duties,
together with the ownership of the assets and liabilities, are transferred to the purchasing firm
while making a stock purchase. This essay discusses the benefits and risks of joint venture and
acquisition processes and critically analyzes what Union UK Ltd should do to acquire HK Carz
successfully.
Literature Review
Both a joint venture and acquisition come with benefits and risks (Stienstra & Martin,
2017; Barner, King, Schriber & Kruckenhanser, 2021: Chen, Lin, Luo & Shao, 2021, pg233).
During an acquisition process (Zawaideh et al., 2018; Kang, Nantharath & Hwang, 2020), the
buying business is susceptible to several risks, such as overpaying the selling firm and
overestimating the synergies(Lewis & Bozs, 2019, Pavicevic & Keib, 2021; Nguyen et al.,
2021). In addition, a business may face challenges such as culture incompatibility, hostile take
over (Belayeva, Danilova & Uskov, 2021), and loss of intellectual property (Keshavarzi, 2021;
Yang, 2021). If the acquisition takes place between two businesses in different geographical
locations, law and jurisdiction are important factors to consider (Yu-Hsin, 2019).
Setting up a purchasing department after an acquisition is very important. The company
in question should develop a corporate identity to be used with suppliers(Flint, Signori &
Golicic, 2018; Michaels & Gruning, 2018; Kashyap, Lakhanpal, 2019). With proper planning
and management, an acquisition can prove to be a profitable business strategy. The acquiring
6
business should devise ways to maximize the combined power f the acquisition (Rennneboog &
Vansteenkiste, 2019, pg 653; Michaels & Gruning, 2018). It is, therefore, the responsibility of
the acquiring business to conduct intense evaluation and research on the company it hopes to
acquire. It will help in strategically coming up with plans to ensure maximum prioritization of
the acquisition.
Benefits and Risks of a 100% Acquisition
Benefits
Union UK Ltd may now penetrate new markets and product lines in Hong Kong and Asia
as a whole, thanks to the acquisition of a well-known brand with a solid reputation and a devoted
client base. As a result, it will assist in overcoming challenging barriers in market entry.
Expenditures concerning market research and new product development make market entry
costly. It is also time-consuming due to the time used to develop a large client base. Therefore,
the acquisition will hasten entry into the new market. Furthermore, the acquisition may rapidly
expand Union UK Ltd’s market share (Bauer, King, Schribber & Kruckenhanser, 2021). Even
though the competition is strong, growth through acquisition can help a company gain a
competitive advantage by facilitating market synergy.
Union UK Ltd will also benefit from new skills and resources and gain new resources
and skills it does not have by buying other companies with what they need. Various benefits are
acquired, such as better long-term financial status and increased revenue, making obtaining
funding for expansion initiatives easier (Chen, Lin, Luo & Shao, 2021). A company’s expansion
and diversification can also help it withstand a downturn in the economy. Union UK Ltd will
also profit from the acquisition of HK Carz in terms of cash availability. A company’s access to
capital improves after an acquisition as it aims to grow larger. Consequently, small firm owners,
7
like HK Carz, are occasionally forced to redirect their own funds in expansion as they cannot
secure large loan capital (Chen, Lin, Luo & Shao, 2021, pg 233). However, after an acquisition,
business owners are able to receive funds and not dive into their pockets due to the availability of
large amounts of capital.
Risks
The culture of a corporation is usually distinct and has evolved. Acquiring HK Carz
could be a problem if the two companies’ cultures are mismatched. Employees and supervisors
from both organizations and their activities may not blend as well as they should. Employees
may dislike the change, causing anger and anxiety. Employees’ tasks may also be duplicated as a
result of acquisitions. Workers and departments end up doing similar jobs if two similar
companies merge. Consequently, this leads to extensive wage expenditure in excess. As a result,
the acquisition may necessitate reorganization and job cuts to improve efficiency (Chen et al.,
2021, 254). Layoffs, on the other hand, may have a negative impact on employee morale and
productivity.
Furthermore, the acquisition may result in incompatible goals. This is because these
companies had operated differently towards different objectives. A good example is when Union
UK Ltd intends to venture into new markets. Still, HK Carz wants to reduce its operating cost,
thus jeopardizing development by creating a situation of internal resistance.
Benefits and Risks of a 50-50% Collaborative Venture
Benefits
A major benefit of joint ventures is that it helps a company to grow rapidly by increasing
productivity and profitability. Both companies will benefit from new market access and
distribution channels (Leonard, Pakpahan, Heriyati & Handayani, 2020, pg 339). HK has extensive
8
distribution capabilities in numerous Asian nations, while Union UK Ltd’s distribution mechanism
relies entirely on third-party distributors through its wholly-owned distributors and third-party
distributors. Also, the joint venture guarantees expanded capacity risk and cost-sharing (i.e.,
liability). It also gives partners access to new knowledge and capabilities, such as specialized
people, and additional resources, such as technology and financing.
Similarly, these Joint ventures facilitate business growth without necessarily borrowing
funds or acquiring other investors. Union UK Ltd will benefit by selling its products to the client
base offered by HZ Cars. It will also offer its existing clientele the services and products of its
partners and join forces in purchasing, research and development, and other areas. Flexibility is
also another benefit of forming a joint venture. In this case, the joint venture can be for a period or
cover only a particular section. As a result, either company’s commitment to the other and the risks
involved are reduced.
Risks
In a conventional 50/50 affiliation, the benefit and losses are distributed equally but so
ate the elective privileges. When a matter occurs in which associates in a 50/50 affiliation differ,
it is tough to go ahead. When one partner says yes, the other says no (Leonard et al., 2020, pg
341). Who will win? Nobody will win. Minus specific provisions in a functioning contract, a
conventional 50/50 affiliation could bring about more challenges than it resolves. This is due to
deadlocks on significant issues that can take place when the partners differ.
Partner conflicts and disagreements are among the biggest challenges facing joint
ventures. Lack of proper communication in giving requirements and aims of the venture often
leads to these clashes. At times, discord can also arise as a result of different expectations either
parties have when forming the venture. Additionally, the available resources such s skills,
9
talents, and investments are not evenly distributed among the parties, and this causes conflicts
(Leonard et al., 2020, pg 341). Cultural and management differences also complicate
cooperation, and contractual limits may imperil a partner’s vital economic activities.
To add to the risks mentioned earlier, the following are more risks relating to the 50/50
affiliation. Clarity shortage on the subject of the responsibilities and obligations of each of the
associates, collision in the administration techniques and designs of different associates which
lead to everyday conflict, inequity of the resources and the capital financed by the associates lead
to regular quarrels and disputes of interest (Leonard et al., 2020, pg 341). Lastly, failing to solve
differences effectively and professionally can also be a major risk associated with 50/50
ventures.
Chosen Way Forward
After considering the benefits and risks of an acquisition and a joint venture, it would be
a more feasible and profitable decision if Union UK Ltd went through with pushing for the 100%
acquisition. This decision has been arrived at after analyzing different issues of the acquisition
listed below.
Financial Factors
One of the most significant advantages of purchasing another firm that sells similar goods
or services is that it may take advantage of economies of scale, increasing output while lowering
pricing. When a company opens a second location, it may employ the same marketing and sales
strategies as the first, cutting costs and improving output. Union UK Ltd will gain a new
audience as well hence expanding its market and increasing its profitability.
10
Reputation
HK Carz has already built its reputation as a reliable vehicle dealer in Hong Kong. After
the acquisition, Union UK Ltd may decide to keep the HK Carz brand intact not to disturb the
existing market dynamics. Using an already existing brand cut down on the threats to entry in a
new market by a wide margin.
Branding
Immediately after the buyout, Union UK Ltd should maintain the HK Carz brand to ease
the transition process. It could then slowly work its way into creating a merged brand in the most
seamless of ways. By doing this, Union UK Ltd will buy itself time to capture the Hong Kong
market and prove its credibility without causing much of a stir.
Risk of Unfriendly Take Over
Both Union UK Ltd and HK Carz are responsible for developing takeover strategies that
will not jeopardize productivity, employees morale, and the general brand of both companies. A
seamless transition will help Union UK Ltd gain ground in Hong Kong and use HZ Carz’s
reputation and brand to establish its Hong Kong markets (Belayeva, Danilova & Uskv, 2021). A
hostile takeover could easily result in disgruntled shareholders and employees, leading to
massive losses and rendering the acquisition inconsequential.
Loss of Intellectual Property
Before the acquisition, both parties should discuss all the intellectual property involved.
HK Carz must have an exhaustive list of every Intellectual Property (IP) (and accompanying
paperwork) material to the business ready for Union UK Ltd’s scrutiny. IP licenses and other IPrelated agreements frequently include conditions requiring the other party’s consent to the selling
company’s change of ownership or assignment of the agreement (Keshavaezi, 2021, pg 230).
11
The acquisition transaction’s structure frequently determines the extent to which such approval is
required. An asset sale arrangement will almost always necessitate third-party approval (Yang,
2021, pg 297). Whether third-party approval is required for a sale of the selling business’s stock
or a merger involving the selling company, on the other hand, will necessitate a thorough
examination of the contract language as well as relevant case law.
Law and Jurisdiction
Companies such as the Securities and Futures Ordinance, which controls the securities
and futures, are mong the laws and legislation governing mergers and takeovers in Hong Kong.
The Codes and Listing Rules concerning share buyback, mergers, and takeovers are under the
mandate of the executive director of corporate finance (Yu-Hsin, 2019, pg 11). To avoid being
on the wrong side of the law, Union UK Ltd officials should be well-versed in Hong Kong
takeover and mergers laws.
Why it is Better to Choose 100% Acquisition
An acquisition is a nobler choice because it gives you the overall power over in what
manner the target’s investment is managed. This is especially significant for transactions
encompassing complicated or exclusive merchandise or provisions and those acquisitions of
resources that need more duration to become beneficial. In addition, selecting 100 percent
acquisition helps an individual increase the marketplace stake of their organization rapidly.
Although competition can be problematic, development via acquisition can be beneficial in
earning a competitive advantage in the market. This enables a person or firm to accomplish
market combined efforts.
12
Acquisition Process
Acquisition analysis is subdivided into three steps, namely; Screening, Search, and
planning. The planning process is conducted by examining product-market strategy and
objectives for key strategic business units, which is the first phase (Rodriguez-Sanchez, MoraValentin & Urtiz-de-Urbina-Criado, 2019). The purchasing corporation should state its possible
directions for diversification and expansion of the corporate in terms of the strengths and
constraints. Additionally, it should offer an appraisal stating technological, political, social, and
economic environment. Specified criteria used in determining the findings of this study usually
include parameters in the industry, the regulation, capital versus labor intensity, and market
growth rate (Zawaideh et al., 2018, pg 153). Other factors included in the criteria list include
profitability, size, share, quality management, and capital structure.
During the search and screen technique, it is carried out in a strategic manner to try and
generate a list of good acquisition candidates. The main objective of this search is to identify
ways to locate the required personnel. Simultaneously, the screening process selects the best
candidates among the applicants depending on the criteria specified in the screening process.
Finally, the financial appraisal method, which is the focus of this essay, is implemented. The
acquiring company and the applicant evaluation are included in the financial review procedure.
As much as it is possible to do a target company evaluation without in-depth self-examination,
this is often the most advantageous technique (Kang, Nantharath & Hwang, 2020, pg58).
Corporate self-evaluation will have to vary in extent and detail depending on the needs of each
organization.
Acquiring firms frequently utilize the market value of the transferred shares to establish
the purchase price for an acquisition. This strategy is inefficient, and it has the potential to
13
deceive and cost the purchasing organization money. Accurate valuations of both the buying and
selling corporations are required for well-planned exchange-of-shares acquisition research. If the
acquirer’s management believes its stock is undervalued in the market, calculating the purchase
price could result in the firm overpaying or earning less than the minimum acceptable rate of
return (Oh & Jhnston, 2020). On the other hand, when overvaluing its shares, pricing at the
market prevents the possibility of availing extra shares to shareholders and still achieves a
minimum acceptable return.
Risks from Acquisition and How to Mitigate Them
Some risks are tough to discover, even with the most cautious formulation. A firm or
person cannot report for everything. The elongated tail of matters that can come about is very
long. And still, if people or firms could create more profound into those matters, they will
possibly be destructing value in another place. The significant move is to take steps that reduce
the possibilities of undesired astonishments from occurring. One major issue relating to law is a
threat to security.
Threat to Security
Information is, of course, important when toiling via a transaction, but the information
collected is not only significant to the firm (Chen et al., 2021). Unluckily, hackers find it worth
as well. Jeopardies to security harm both the seller and buyer side and, therefore, the general
value of the transaction. Applying virtual information rooms is one way to deal with security
jeopardies when distributing and evaluating private data (Chen et al., 2021). Furthermore, a
virtual information room that is needed should be: International Organization for Standardization
(ISO) conforming, has a digital emblem, brags steady encryption techniques, needs a double
factor verification, and has numerous document consent and limitation settings.
14
How to Avoid Spending too Much on the Target Business
First and foremost, concentrating on a company’s overall strategy and broad aims is
critical in laying a foundation to avoid overpayment. There are a few essential questions that will
guide Union UK Ltd in its acquisition endeavor. Why is it so eager to complete this transaction?
What are its primary objectives? Are there any other options for achieving these objectives
besides acquisitions? Next, whether the organization completes its appraisal or pays someone
else to do it, it is a good idea to provide a detailed valuation report (Lewis & Bozos, 2019). Each
case should collect critical business facts regarding the desired outcomes to arrive at a more
realistic and appropriate price. Some of the most valuable information for a business include
financial information for a period not less than five years, tax returns, personnel count,
agreements from the stakeholders, and a detailed overview of the organizational structure, to
name but a few.
It is vital to regard the computed proper price as a limit rather than a starting point when
studying the previous facts and valuation report; this generates a strong shift in thinking that
leads to paying the correct price for a target. Finally, it is crucial to check a company’s ego,
especially when determining appropriate transaction pricing. Egos usually run high during the
making of deals or when deliberating a target, which causes good business judgment to be
forsaken or ignored.
Synergies are often Overestimated
There are synergies to be found. It is just that they are not the all-in-one solution that
many acquiring executives believe they are. Synergies are commonly presented as the sole
justification for acquisition, whereas they should be just one of several factors to evaluate.
According to McKinsey management consultations’ research, about one out of four managers
15
overestimates the post-deal synergies by a margin of about 25%. If the deal succeeds through
scop and scale, joint distribution, intellectual property, best practices, potential, and working
personnel, these executives often envisage synergies across the board (Chen et al., 2021, 235).
This lack of concentration means a company risks not having any synergy money if it tries to
generate them everywhere.
How to Keep Synergies from being Overestimated
When it comes to deal synergies, companies are advised to become conservatives which
is crucial in controlling the outcome of the dealings. There are various tools, such as the
valuation spreadsheets and the Merger and Acquisition (M&A) management platforms, which
companies can utilize in efforts to determine synergies (Pavicevic & Keil, 2021, pg 1698). Once
it has computed its synergies, it should divide the total by two to keep deal synergies minimum.
Gaps in Integration (Risk of Merger and Acquisition Integration)
The most difficult component of every transaction, according to M&A professionals, is
post-merger integration. There are many challenges that companies have to endure and
overcome, ranging from Salesforce integration to internal management audits, which present
significant risks, such as inability to realize synergies, employee dissatisfaction, and, ultimately,
loss of value. Furthermore, there can be significant disparities in scale between each integration
process, which exacerbates the risks. Integrations are considerably more difficult because culture
is not always obvious because of adopting the most important part (Bauer et al., 2021). Lastly,
these considerations can be used to evaluate how dangerous it is to venture into the integration
process.
16
How to Prevent the Most Common Merger and Acquisition Integration Blunders
Having team members join the integration team is practically considered the first logical
step towards strengthening the M&A. This ensures that information is uniform and streamlined,
reducing the amount of time, effort, and resources spent on undertaking redundant tasks.
Additionally, the diligence team should include individuals who have a deep understanding of
value and quality production matters. Players with strong Independent Market Organization
(IMO) and project management skills should be included on the team (Nguyen, Zhu, Jung &
Kim, 2021). Finally, preferably from Union UK Ltd’s organizational development department,
Human Resource (HR) will be part of the integration team. When you have an integrated team
comprising talented and experienced individuals in place from the beginning, it is easier to keep
a close check on integration plans as new insights and a deeper understanding of the target
organization emerge during research.
Setting Up the New Joint Purchasing Department
Before choosing to combine or purchase another company, the procurement department
should be called in to assess cost-cutting opportunities during the due diligence process. It
permits executives to talk about the reasons for the merger and evaluate procurement’s role. The
most important reason to incorporate procurement early on is to reduce risk.
Corporate Identity to Be Used
The term’ corporate identity has a wide range of meanings and depths in literature.
Dimension and complexity span from a narrow definition as a design concept. It spans from
understanding the phrase as a communication/marketing strategy to a synonym for a holistic
concept for strategic business leadership (Flint, Signori & Golicic, 2018, pg 70). Customer
Intelligence is a Corporation’s Internal and External self-representation and the potential for
17
stakeholders to use their imagination. Even if anxiety and exposure are considered among the
key criteria, identification must be more than a catchphrase, a logo, or a slogan. Corporate
identity is divided into three categories of effect: internal effects, outward effects, and superior
effects (Michaels & Gruning, 2018). Naturally, one of the goals of a corporate merger is to
establish conditions that allow the merger’s goals to be met.
The development of a Credit Point that satisfies the current and future expectations of the
corporation and the environment and their realization within the organization is required for the
configuration of CI (Flint et al., 2018). While the demands explain the desired aims, values, and
norms, the culture, created by the past, encompasses all of the company’s attitudes toward
values, norms, standards, and behavior patterns and symbols. As a result, there is a zone of
tension between the lived identity and the striven shall-state.
The most conservative way of corporate branding is to make no modifications to a
company’s brand. However, this does not necessarily imply that the HK Carz brand is selfcontained, as the market understands it. In mature categories, the No Change strategy works best
when two brands are mutually exclusive, and no plans of either brand will affect the other
(Michaels & Gruning, 2018). No Change is common in the consumer packaged goods industry
when brands are marketed to appeal to various sectors in the same category. This strategy can
help the team members, particularly those who built the acquired brand, feel valued by
expressing continuity to stakeholders.
The No Change strategy’s business-as-usual approach, on the other hand, causes the lack
of actual or perceptual integration. Operational synergies could be missed due to a lack of
perceptual and actual synergies. To justify the acquisitions and mergers, companies would most
likely include some efficiency level by gathering strengths that are often disguised if the go-to
18
brand fails (Michaels & Gruning, 2018). The justification for the merger or acquisition most
likely includes some level of efficiency and gathering strength, which will be disguised if the goto-market brand fails. Therefore, Union UK Ltd should approach this strategy carefully and
intellectually to mitigate any problems from the No change approach.
Maximizing the Combined Organization’s Power
It is easier to conduct a merger due diligence if both firms have category plans, which
detail what the departments want to do with its facilities, travel, and other areas in the next years
(Alaaraj, Mhammed & Bustamam, 2018). When plans are in place, comparisons can be made,
allowing assessments to progress more swiftly and precisely. Reviewing the contracting clauses
before the merger is vital (Rennebog & Vansteenkiste, 2019, pg653). Many businesses are not
very sophisticated in contracting if corporations cannot get out of contracts during the merger
because it would be nearly impossible to change supplier bases.
Union UK Ltd can use the same parts in Union UK Ltd and HK automobiles to maximize
commercial leverage and cut costs. Also, Union UK Ltd can use its access to HK’s third-party
distributors and HK’s distribution outlets to increase its target audience. It can also use spare
production capacity in the UK to produce HK automobiles and vice versa. Union UK Ltd can
comply with local safety regulations by sharing technical knowledge between companies about
their vehicle system designs.
19
Clause Titles for a New Set of Corporate Terms and Conditions that will be Utilized with
All Suppliers
The use of a contract to document the transaction ensures that both firms and suppliers
take the relationship and obligations seriously. It includes significant dates such as the delivery
of products and services and deadlines for making timely payments. These agreements are also
useful when establishing a manufacturer/supplier and distributor relationship (Kashyap &
Lakhanpal, 2019, pg 49). A company designs a new product and employs a firm to manufacture
it before releasing it to the general market.
Depending on the industry and items provided, the terms and clauses of the agreements
fluctuate. The contract contains a significant amount of confidential information. A
confidentiality agreement ensures that a company’s trade secrets and formulations are not shared
with the manufacturer or distributor. The contract’s secrecy clause provides this protection. It is
also crucial to include a provision about where things are sold. The security of the business
concepts is a major plus (Kashyap & Lakhanpal, 2019, pg 49). Even if there are no worries
about confidentiality, Union UK Ltd should nonetheless utilize an agreement. If Union UK Ltd
does not want a supplier distributing vehicle parts to other companies, it may impose restrictions
on the arrangement.
The agreement must also incorporate regulatory requirements and liability terms.
Essentially, the agreement must cover all aspects of a company’s manufacturing. These contracts
are used by a wide range of businesses and sectors. They all have one thing in common: one
party develops items for the other, while the other sells the products. The manufacturing party is
hired to make a certain number of products or supply services within a certain time frame. A
20
company cannot effectively limit risk until it understands and implement the fundamentals of
supplier management.
Conclusion
A joint venture or an acquisition can be a profitable business move if properly planned
and executed. However, both strategies are not without their shortcomings. Therefore, a business
should conduct intensive research before making such a huge business decision.
21
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Table of Contents
Abstract …………………………………………………………………………………………………………………………. 4
Introduction ……………………………………………………………………………………………………………………. 5
Literature Review……………………………………………………………………………………………………………. 5
Benefits and Risks of a 100% Acquisition …………………………………………………………………………. 6
Benefits………………………………………………………………………………………………………………………. 6
Risks ………………………………………………………………………………………………………………………….. 7
Benefits and Risks of a 50-50% Collaborative Venture ……………………………………………………….. 7
Benefits………………………………………………………………………………………………………………………. 7
Risks ………………………………………………………………………………………………………………………….. 8
Chosen Way Forward ……………………………………………………………………………………………………… 9
Financial Factors ……………………………………………………………….
