This week we are going to look at the possibility to acquire another company or to merge with another company to become bigger than we are now.
To start a company in your own country is one thing. When you want to go abroad it could be interesting to buy or to start another company in a foreign country.
What to do:
1. Sum up the advantages of a separate legal entity to do business
A. Rehearse the principles you know from previous courses, discuss what you know with your team-members
• It doesn’t dissolve when one of the owners leaves the business.
• If a shareholder dies, the company may transfer her/his shares in the same way as any other property, and the corporation isn’t going to be negatively affected;
• A shareholder can disconnect from the corporation by selling all of her/his shares without negatively affecting the company.
• Separates the actions of the entity from the individuals in the company.
B. Decide where these principles could be advantageous for your business
If our business fails, we as individuals aren’t responsible.
If we have made debts, they are not shared by the shareholders.
If any person tied to the entity dies or leaves the company, the entity continues on without that person.
Shareholders can sell their interest in the company and allow the company to continue on without them.
C. Write down why (the advantages) you would choose for a separate legal entity for your business
We have two CEO’s , and a lot of shareholders. If one of them leaves, our business doesn’t end or isn’t going to be affected by the departure of a shareholder.
2. Study the principle of mergers and acquisitions
A. Listen again to the videos of mergers/acquisitions
B. Discuss in your group what kind of merge/acquisition would be interesting for your business (vertical, horizontal) Motivate your decision.
I. A supplier
II. A producer
III. A distributor
IV. A competitor
C. Write down your conclusions and motivate exhaustively
A Vertical merge: a company merges with a supplier (our case). To ensure that we have a constant supply of goods to make our glasses. When we merge with our supplier, we can control the price setting. For example: we could merge with Essilor, a company that makes glasses. This way we wouldn’t have to worry about not having the goods to make our glasses.
We will merge into a new company. We will buy the assets of Essilor. The following documents need to be sorted out before the merge is legal:
• Name and registered office of the companies involved: it will be a merge between GP’Eye and Essilor.
• Effects on employment: We will take over all the employees and make sure they can continue working in the function they had before the merger.
• The date from which the new holders of the securities of the company resulting from the merger will have the right to dividends
• The statutes of the company resulting from the merger: We will adapt our own statutes and not the statutes of Essilor.
D. Search if there are companies with whom you would like to merge (real examples in countries you want to expand to)
http://www.essilor.nl/over_essilor
We would like to merge with Essilor because it’s an international company. In 1971 the company merged. In 2016, Essilor was mentioned in the Forbes top 100 list for the most innovative companies for the sixth time in a row. They could be interested in merging with us because we have a new idea, something they haven’t seen or done before.
1) What could be the reason to merge with this company?
Gaining benefits, less competition, lower production costs, supplies whenever we are in need of them…
2) What are the advantages to merge with that company?
Reduced costs: When we merge with that company we can reduce many of its expenses. Budgets for things like marketing might be trimmed. And if we merge with a company we can also share office space.
Market penetration: When the individual companies had been demonstrably successful in separate markets, the new company will be provided with access to more customers.
Diversification: When we merge with another company we can offer a greater range of products and services. Because of this merger we have complementary products and we are able to capture more consumers than we would as an individual company.
Skills and knowledge: As a merge company we can make use of the very best minds of both companies. When two departments work together it’s more likely to generate innovative products.
-> http://smallbusiness.chron.com/advantages-company-mergers-22476.html
E. Or…Search for companies you would like to buy. Give arguments why you would like to buy this company?
-Rayban, Oakley, Vogue-Eyewear, Persol,..
1) Is the company reliable?
Yes, they work with Google-glass, our main competitor. So they know, how to handle our product because it’s more or less the same.
2) What are the advantages to buy this company?
Less competition, more options for our designs,..
F. Write down your conclusions.
We’re searching for a modern company/business with some nice designs. We hope to learn from them and use their special techniques. If we help each other out (the two companies), we can find a way to cut the administrative costs, etc.
We will get some advantages from merging with a company who is already long in the glass industry. They know the market better than we do.
We would like to create a third company, where we and Essilor will merge together in a new company. All of our and Essilor’s assets will be transferred to the third company. In that way
3. Find one example (you can choose one of the examples you find on bb or find one yourself
e.g. Tata group, of a merge you're interested in and give critical comments (do you think this will be good for consumers, for the business,…) to it. (general example you found information about in newspapers).
The merger of Essel and Silor in January 1972 that led to the creation of Essilor. This important merge represented an important step for the Group that helped shape its future development. The alliance of Essel and Silor, with their roots in companies created in 1849 and 1931 respectively, gave Essilor a solid foundation for growth, a set of fundamental values and a tradition of product quality and innovation. These key assets have been developed and strengthened over the years.
Essel and Silor each contributed innovative technologies that have enabled the Group to attain its current leadership position. The mission to improve eyesight was explicitly part of the 1972 merger agreement and continues to drive the Group’s mission and culture of social responsibility.
We think this merge was very important for the business we are working in. The quality of the products really grew since the merge. Thanks to the merge the technologies have changed faster and better.