Critique of Emotional Reason
In considering whether to amalgamate the newly acquired firm into the parent firm or simply operates them as distinct separate entities will be guided by the major objective of which the merger is based on. The main sole objective is to make supernormal profit in the decision chosen, reduction in the liabilities of the two firms, protection to share holders and reduction in corporate tax liability of their owners and the two firms as well – this strategy will result into two distinct firms with one managerial organ running the affairs of the two firms. Consider Goals and Objectives to be achieved. Whether the objective of the making such decisions are: Profit maximization Respect and motivation of a large number of employees of the downsized firm; or c.Retaining many employees in the firm.
3.Decision making As presented in the above order. Choosing alternative course of action. a.Consolidate the above companies b.Operate the consolidated firm as a separate legal entity.
This will result into two separate firms under one top manager responsible for decision making Evauate Assessing each alternative course of action basing your assumption to the degree to which alternative chosen will satisfy each goal at a time1.Merge the acquired firm into my firm In consolidating the two firms, proponents argue that the value of share holders wealth will be maximized hence achievement of costs and revenues. There will be proper positioning of the firm’s product and as well as improving the competitive advantage of the firm. Sometimes mergers and acquisitions may not go smoothly as the best talents may quit from the firm. This may pose a serious risk to the firm thus destroying the value of the share holders’ wealth instead of achieving costs and revenue benefits.
The risks associated with mergers and acquisitions may choose to proceed up to the monetary role ignoring the role played by experience (Thagard 2000). In operating the two firms as separate legal entities, the top level management will be responsible for formulating, implementing the major decisions that affects the two firms. The share holders will be able to retain their authority as the real owners of the firm and as the top brass of the firms. In addition, the firm may a chieve full efficiency in its market share. The market positioning will also improve.
The company may also plan some retirement packages for her employees and set the retirement age for the long serving employees (Thagard 2000). Select the optimal decision. Two alternatives exist: Either to consolidate the firm into the parent firm or run it as a separate legal entity. The best decision will be to operate the firm as separate legal entity which will two separate firms having one manager responsible for formulating policies and implementing them. The manager will also be responsible managing both the companies (Thagard 2000). Criterion chosen was based on:a.
Profit maximization; b. respect and motivation of a large number of employees of the downsized firm; or c.Retaining many employees in the firm. The above alternative was picked since it had the highest expected value. The decision was based on quantitative approach and not subject psychological response.
The objective will only be realized after determining its reliability. Since the market share of the above firm increased, then, we can confidently conclude that the management teamed up, there was proper market positioning and the firm also the company has competitive advantage. Thus the initial step in consolidation has passed and there is a positive rate of return. The strategy is perfect.