Acquisition or Salvaging a Weak Firm
Many industry theorists consider acquisitions a negative business activity. Under an acquisition a bigger corporate takes over a smaller one and imbibes it within a greater structure. However, this means changes in the hierarchy, work culture, productivity, administration and management. Many a time’s private equity firms are aggressive about an acquisition and economists term it as a ‘hostile takeover’. Nevertheless, acquisition is a business venture that corporates have been carrying out for eons. Moreover, the objective of an acquisition is not only earning more revenue and increment in the profit margin, but also ensuring better management of both firms.
According to Rob Joubran COO of Platinum Equity acquisitions are also bail outs for weak and fragmented companies. While making an acquisition all private equity firms ensure that the basic stricter of the acquired firm is not disturbed. As a business consultant Joubran mentions that during a merger or an acquisition both parties have extensive discussions about the welfare of the employees. This is essential to ensure the confidence and loyalty of the employees on the new management. Thus, instead of writing off an acquisition as a ‘takeover’ Joubran insists that one must evaluate all aspects of the business venture.
Some of the advantages of an acquisition as per Robert Joubran are as follows:
- If a company has a good business plan and production unit, but is unable to continue its activities due to lack of funds, then acquisition will prove to be beneficial for the firm as a whole. Being a part of a bigger corporate it will have access to a better management and more funds.
- Joubran believes that acquisitions can help consolidate a fragmented industry. Certain sectors of the economy like the healthcare industry or pharmacy lack structure. Instead of smaller firms working individually, acquiring and then merging two or more firms can lend structure to the industry.
- Many private equity firms perceive acquisitions as a bailout for weak companies. Often due to lack of good management, structure and vested interest in the wellbeing of the company, small and medium businesses (SMBs) are unable to produce good results. In such cases an acquisition can ensure the welfare of the company and its employees.
Thus, according to Joubran it is essential to evaluate all aspects of an acquisition, especially its advantages before deciding against it.
Having passed out of the University of Michigan with a Bachelor’s degree in Marketing/ Business, Joubran went on to work at different places before climbing the corporate ladder to become the Chief Operating Officer of Platinum Equity. Before joining Platinum Equity Rob Joubran has worked as Vice President Sales for Banyan Information. Having slowly made a name for himself as an excellent business strategist, Joubran has always spoken for mergers and acquisition. Hence, if one feels that a merger of an acquisition will work in favour of one’s business organization, then definitely consider it. An acquisition by a private equity investment company may help the firm become a niche business organization.
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