When acquiring another organization in the same industry negations are focused on relative value of each company in negotiating a purchase price (Blank, 2012). The purchasing company will acquire all or part of the purchased company. It may also reduce cost of production, improve efficiency, and create a larger entity. If Riordan Manufacturing was to purchase another company that produced plastics, they could reduce many bottom line cost and increase company growth. These actions would strength Riordan Manufacturing in the marketplace
Riordan Manufacturing has the opportunity to integrate different management styles as they acquire the purchased company. They also have the opportunity to merge the managers and employees. Riordan may spread to markets they have not been able to reach in the past. If the purchased company has markets in the east, Riordan would be able to obtain the marketing in the east as well as the west. This would improve the bottom line profits for the company.
There are risk involved when acquiring another company. A few questions must be asked by Riordan Manufacturing before a decision is reached. Why is the business for sell? (“Grow Your Business by Acquiring Another,” 2005) Can Riordan Manufacturing control enough of the market to stay or become profitable? (“Grow Your Business by Acquiring Another,” 2005) Research around reputation and raw material supply must be completed before an acquisition occurs. If the purchased company has a poor reputation, Riordan Manufacturing would need to ensure the reputation does not affect their good name. “Tax implications of acquisitions can be both advantageous and detrimental to the merged entity” (Blank, 2012, para 5). In the United States there are laws that limit the tax liability for acquiring a less profitable company. This reduces tax advantages Riordan Manufacturing to acquire another company. Riordan Manufacturing must way the advantages and risk of acquiring a similar company to...