HR Planning - Merger (Stonewall Case study)

1995 words 8 pages
1. In 2008 British Wallboard, the parent company of Stonewall has seen enough of the volatility in the Canadian construction materials market and sells the company to a competitor, US Corp. Its subsidiary, Canadian Wallboard, and Stonewall will merge into one organization. What are the benefits of the merger to British Wallboard? US Corp? Canadian Wallboard? Stonewall? (10 marks)
A merger is a consolidation of two organizations into a single organization. [1]
There are certain benefits that derived from the merger, which would also boost the operations and financial performance of the organization.
Benefits That Will Be Experienced By the Four Companies:
The Stonewall Company and the Canadian Wallboard Company, as the main wallboard
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Along the course of the synergizing processes, issues, limitations and obstacles can appear before, during or after the merger event, which can cause turbulence internally in the new entity itself and new entity and ripple effect externally which the both companies may only have limited influence. [10]
Stonewall occupies 35-40% of the share of Canadian market. With the merger of Stonewall and Canadian Wallboard, it may result in the monopolization of the industry. To protect the competition in the market, the Canadian Securities Administration may not allow such merger to happen. If US Corps puts the time and effort into the merger, only to have it blocked by the CSA, it has wasted a great deal of money in man-hours, which is financial risk. [11]
One major financial risk involved in this merger is that US Corp may put itself into too much debt with the expectation of paying it off from new profits once the merger is complete. However, due to the fact of deep recession and the plummeted housing market, the demand for gypsum wallboard in Canada is virtually non-existent. It might be possible that the new, merged company may not achieve the forecasted economies of scale or complementarities or be as profitable as expected. This will be highly risky because if the merger does not go through, US Corp is

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