Mergers and acquisitions for entry into new markets “provide effective access to new markets as well as providing the company with an existing workforce and infrastructure. As a result of merger or acquisition, the company can consolidate its position globally as well as repositioning itself in a particular market or geographic region. The main difficulty with mergers and acquisitions is that they must comply with government policies and regulations. Equally, absorbing a foreign organization, its workforce, cultures, customs and procedures into the larger company may prove to be managerial and administrative problem.” (‘Market Entry Strategies’)
The most controversial aspect of an acquisition is the takeover process, whereby the local business is usually taken over by the investing business or the new market entrant. The cultural discrepancies as well as the method operations amongst the two businesses can result in consolidation problems. “In order to avoid future difficulties, it is recommended that potential acquirers carefully examine the organizational and national cultures of potential acquisitions, even before the beginning of any formal negotiations, in order to ensure their compatibility with the acquiring firm.” (Newburry & Zeira, 1997)
The acquisitions require extensive amount of financing which can be acquired through private equity placement, sale of leaseback vehicles, bridge or loan terms, and revolving lines of credit. The benefits however of operating through an acquisition result in acquiring of key personnel, increased purchasing power, greater geographic reach, more product lines, industry recognition, increased customers base as well as reductions in fixed costs and overheads.
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