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)
The benefits of the merger to British Wallboard:
The benefit to British Wallboard of the sale and subsequent merger is not having losses from poor market conditions for Stonewall Industries.
British Wallboard may recognize some tax benefits from the sale of Stonewall Industries.
The benefits of the merger to US Corp:
Strategic …show more content…
The risks of the merger to US Corp, Canadian Wallboard and Stonewall Industries:
Study shows that nearly half of the senior executives in large acquisitions leave within a year of a takeover, and 75% leave within three years. The organizational effects are that it takes from 6 to 18 months for an organization to assimilate the results of a Merger and Acquisition, and the productivity loss is estimated to be about 15%.
Challenges to joining two companies – integrating computer systems, eliminating duplication, re-evaluating supplier relationships, reassuring clients, advising employees, and reconfiguring work routines.
Risk of losing good employees – due to uncertainty or lack of desire to work for the merged company. The time needed to replace top performing employees is an added cost.
Increased insecurity among employees, lower levels of satisfaction at work, less affective commitment and a loss of trust in the firm and its top managers.
Sometimes the merger occupies so much of managements time that the business needs are neglected.
Reasons for failure of mergers: Integration difficulties Inadequate evaluation of target Large or extraordinary debt Inability to achieve synergies Too much diversification Managers overly focused on acquisitions Too large an acquisition Difficulty in integrating difference corporate cultures