Mergers and Acquisitions

MERGERS AND ACQUISITIONS 8

Mergersand Acquisitions

QuestionOne

Mergersand acquisitions can be considered due to different reasons. Forinstance, firms may feel that they can merge in order to increasetheir efficiency in the production of a certain product or in theoffering of a given service. Besides, firms may merge in order to becapable of meeting a diversification strategy. Take, for instance,firms may have a desire of diversifying their products or services,which can become facilitated by considering a merger. On the otherhand, firms may consider merging in order to have an opportunity ofoffering a full service range (Gaughan,2013).Furthermore, in some cases, an acquisition may be as a result ofanother firm considering an exit strategy. In this assignment, anacquisition of Algo Trim by Apple Inc. shall be considered.

In2013, Apple acquired the Algo Trim Company, which emerged as one ofthe ways of fulfilling its strategy. Apple has a strategy ofpurchasing smaller firms that have the expertise that it requires inaccomplishing its goals (DePamphilis,2013).Rather than purchasing big companies that can become successful ontheir own, Apple considers acquiring small firms that can help itproduce or offer better services to its customers. The circumstancesleading to the acquisition of Algo Trim emanated from the desire ofApple to offer quality and competitive products to its customers.Apple had a desire of designing phones with high performance and goodimaging. Therefore, it considered acquiring Algo Trim as a goodoption because Algo Trim dealt with building codec and designsolutions, which maximize the performance of data, computer and videographics, mobile imaging while mitigating memory requirements.Therefore, due to the expertise that the firm had, Apple saw the needof acquiring this firm. Besides, the firm was not so big to rely onits own expertise in order realize success therefore, acquiring thefirm emerged as an excellent option for Apple Inc. in case thecompany was a big one with the capacity of realizing success, suchthat it could stand on its own, it could be difficult to acquire toacquire the firm. Hence, in considering the acquisition, size of thefirm was a critical factor. However, the major factor leading to theacquisition of the firm by Apple was the expertise of the firm, whichcould benefit the Apple Company and the need of Apple Company toproduce quality products.

QuestionTwo

Amerger or an acquisition can have either positive or negativeimpacts. This implies that not all mergers and acquisitions canresult in positive impacts. In some cases, firms have acquired otherfirms and have become failures in the market due to the high costsinvolved in acquiring a firm. In case a firm acquires another firm inorder to utilize its impact in a given area, the firm acquiring theother is likely to benefit from the expertise of the other firm. Forinstance, the firm can use the expertise of the acquired firm inenhancing the products that it offers. Besides, the firm can use theexpertise of the acquired firm in generating new products that willbe critical in the consideration of a diversification anddifferentiation strategy (Lashinsky,2012).The acquisition of Algo Trim had positive effects to the AppleCompany.

Oneof the effects of the acquisition was that the Apple Company wascapable of enhancing its services to its customers. Because of theexpertise that Algo Trim had in data compression, the Apple Companyhas been capable of enhancing its services. For example, it has beencapable of making services like iTunes exceedingly efficient forphone devices such as the iPhone. This has been exceedingly criticalto the Apple Company since it has helped the organization in buildingadditional revenues as it adds value to its services. Anotherpositive effect of the acquisition is that the acquisition has helpedin increasing the customer base of the Apple Company. Throughacquiring the firm, the customers that were previously with Algo Trimbecame customers of the Apple Company. This enhanced the number ofcustomers that were initially the customers of the Apple Company.Through the increased number of customers, the company has beencapable of increasing its revenues. Thus, the acquisition has broughtpositive effects due to enhancing the company’s position. Besides,the acquisition has brought a positive impact as it has helped Applein building exceedingly efficient media delivery for mobile devices,which utilizes less bandwidth as quality is preserved.

QuestionThree

Througha merger or acquisition, the organizational structure adopted by theprevious firms may change in order to suit the new strategies adoptedby the firms after an acquisition. However, this may not always bethe case since the acquiring firm may consider maintaining itsoriginal organizational structure after the acquisition. In the caseof the acquisition under consideration, the Apple Company did notchange its organizational structure, but continued with itspreviously functioning organizational structure. On the other hand,the acquired firm (Algo Trim) had to drop its previous organizationalstructure and adopt the organizational structure of the AppleCompany.

Therewere varied differences between the resulting company and theoriginal two companies that existed prior to the acquisition. One ofthe notable differences amid the resulting company and the originaltwo organizations was the customers. Prior to the acquisition, thetwo organizations had their own customers that associated with eachorganization. However, upon the acquisition of the Algo Trim Company,the customers of the Algo Trim became customers of the Apple Company.Another difference between the resulting company and the original twois the change in the use of the organizational structure. Initially,the two organizations had different organizational structures, whichwere utilized in the running of the two distinct organizations. Uponrealizing an acquisition, the two organizations resulted in using theorganizational structure of the Apple Company. The Apple Companybeing a vast firm and Algo Trim being a small firm, it wasexceedingly easy to tuck the organizational structure of Algo Triminto its own organizational structure. Another difference between theresulting company after the acquisition and the original twoorganizations entails the names of the organizations prior to andafter the acquisition (Zylla-Woellner, 2013). The two organizationshad different names prior to acquisition however, after theacquisition, the acquired firm had to change its name since it becameabsorbed by the Apple Company. On the other hand, there was also adifference between the resulting company after the acquisition andthe two organizations in terms of the scope of the companies.Originally, the two companies had a difference in terms of theirbusiness involvement. The resulting organization has a differentscope as it produced products with enhanced performance, which didnot overlook quality.

QuestionFour

Dependingon the merger or acquisition, human resource management practices maybecome changed or modified in order to suit the strategies of themerger or acquisition (Sadeghi,2012).However, this is not always the case since it may not seem necessaryto modify the human resource management practices. In the case of theacquisition of the Algo Trim, there was no need of modifying thehuman resource management practices. Different reasons can bespeculated for having no need to modify the human resource practicesafter the acquisition.

Oneof the reasons for not changing the human resource managementpractices was because the human resources of the Apple Company didnot change upon acquiring the Algo Trim Company. It is usuallyrecommended to modify the human resource management practices, whenthere are new human resources in an organization that tend to bediscontented with the ongoing practices (O`Grady, 2009). In the caseof this acquisition, it was not necessary because there were nocontradictions concerning the human resource management practices.Another reason why modifying the human resource management practiceswas not necessary is due to the reasoning that Apple was a vastcompany while Algo Trim was a small company. This implies that theacquired company had to follow the practices of the Apple Company.Besides, it is the strategy of the Apple Company to acquire smallfirms in order to ensure that it follows its organizational structureand practices that are adopted by the Apple Company. In this case, itis not necessary to change the human resource management practicessince the acquired firm will have to automatically adopt to the humanresource management practices used by Apple because of its strategy.Therefore, it was not necessary to modify the human resourcemanagement practices after the acquisition.

Conclusion

Applehas a strategy of purchasing smaller firms that have the expertisethat it requires in accomplishing its goals. In 2013, theorganization acquired Algo Trim in order to be capable of using theexpertise of the small firm in enhancing its productivity. One of the positive effects of the acquisition was that the Apple Company wascapable of enhancing its services to its customers. Because of theexpertise that Algo Trim had in data compression, the Apple Companyhas been capable of enhancing its services. For example, it has beencapable of making services like iTunes exceedingly efficient forphone devices such as the iPhone. Besides, the acquisition increasedthe customer base of the Apple Company. Through the increased numberof customers, the company has been capable of increasing itsrevenues. After the acquisition, the Apple Company did not change itsorganizational structure, but continued with its previouslyfunctioning organizational structure. On the other hand, the acquiredfirm (Algo Trim) had to drop its previous organizational structureand adopt the organizational structure of the Apple. The twoorganizations had different names prior to acquisition however,after the acquisition, the acquired firm had to change its name sinceit became absorbed by the Apple Company. On the other hand, after theacquisition, the human resource management practices did not change,which implies that the acquired firm had to follow the practices ofthe Apple Company.

References

DePamphilis,D. M. (2013).&nbspMergers,acquisitions, and other restructuring activities: An integratedapproach to process, tools, cases, and solutions.Gaughan,P. A. (2013).&nbspMaximizingcorporate value through mergers and acquisitions: A strategic growthguide.New York: Wiley.Lashinsky,A. (2012). InsideApple:&nbspHowAmerica`s Most Admired–and Secretive–Company Really Works.Pennyslavia: Grand Central Publishing.

O`Grady,J. D. (2009).&nbspAppleInc.Westport, Conn: Greenwood Press.

Sadeghi,S. (2012).&nbspDefensiveStrategy – Apple`s Overlooked Key to Success.Berlin: epubli GmbH.

&nbspZylla-Woellner,J. (2013). BusinessAnalysis of Apple Inc. NewYork: GRIN Verlag.