Computech Company Case Mergers&Acquisitions

4244 words 17 pages
Company Profile of CompuTech Company

Marco Garibaldi was a computer hacker and began to develop computer programs in the basement of his parents’ home. His first software program named as “WordPro” aroused great interest among the academic and the business communities. That was the story behind the establishment of “CompuTech Industries” in 1983. The company went to public in 1990 for the first time. By the end of 1995, CompuTech’s stock price was $25 per share and its outstanding shares were 10,000,000.

CompuTech has developed a solid reputation especially for reliability and timely introduction of new products. Besides, it supplies a toll-free telephone service in order to identify and correct program bugs. Its products are perceived
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CompuTech Company can use the advantage of M&A in terms of synergy, diversification and purchase assets below its replacement cost. Controls of the firm and tax concerns are not applicable in CompuTech’s case at all.

CompuTech wants to increase its variety of products. Also it pursues a large market share. It has no tax concerns and no intention to take the control over the other firm because of the strategic reasons. Its purpose is much more in economic sense rather than strategic.

Types of Mergers (Hostile vs. Friendly)
A merger is joining of two firms in order to form a single firm and it can be distinguished as friendly and hostile. In friendly mergers, management of the target firm is willing -at least neutral- to merge. Friendly merger takes place if management of target company will agree on the issue with the acquirer. In that kind of mergers, management of both sides come together and discuss about the terms of contract (including the merger price, restrictive covenants and flexibilities). However in hostile mergers, target company doesn’t want to get into a merger or deal is not achieved by negotiation process or even the targeted company doesn’t know intention of the acquirer in advance.

Acquirer firm prepares merger contracts in general. Determining the types of payment (by cash o by stock), amount of offer, price and other legal and