Microsoft Acquisition
Acquisitions and mergers always incline at increasing markets for products that will enhance returns on investments. However, to obtain a successful merger or acquisition, different financial and strategic steps need to be taken to avoid last-minute regrets and losses from poor decision making. Competition in the market has also facilitated purchases since different companies are experiencing difficulties in operations hence forced into mergers to sustain their business. Additionally, to create market share in a monopolistic kind of market, acquisitions have also been adopted, thus providing consumers with perfect alternatives in the event of exploitation from one producer.
In the case of Microsoft and Yahoo, different approaches have been made to bring the search company on board. Yahoo has been experiencing financial hard times, even leading to the reduction of 1,000 workers (Fried, 2008), a move that caught consumers by surprise. This move was a direct indication of the continued drop in business for the company with its major competitor in the industry, Google, making positive financial strides to the extent that the market is considered monopolistic when it comes to search companies. Microsoft, on the other hand, is struggling to remain relevant in the ever-changing technology industry hence the bold move to acquire Yahoo even though the search company never invited the bid.
Considering the shareholders need for an increase in market share coupled with good returns on investments and the need to provide the market consumers with a reliable alternative, Microsoft should purchase Yahoo. Sustainable development always addresses the need to remain relevant to the consumers in the current markets before consideration of future needs. Microsoft’s strategic plan with Yahoo on board is to increase its advertisement to ascertain additional income, which initially was not being earned. Mergers and acquisitions strive to generate value from transactions that initially never created returns (Junni et al. 2019). The approach is aimed at maximizing Microsoft profits in both the short and long term.
The current business trends of Yahoo cannot sustain its quest for future existence hence the need to accept the acquisition. A $44.6 billion bid, which generally amounts to $31 per share, is worth considering in light of the current financial troubles. Shareholders have been offered cash or stock payment, making the deal more flexible to all investors with different approaches. Even though Yahoo considered the move by Microsoft as unwanted, little was done to reject or turn it down, thus creating speculations of management and shareholders’ consideration for the acquisition.
Considerations for the Acquisition to Happen
Being the CEO of Microsoft, I would adopt a friendly acquisition approach to ensure the deal goes through considering Yahoo’s claims of the unwanted bid. Yahoo being among the leading search companies, shows that the management team did a lot of screening of potential deals before arriving at this very one. The opportunities from the sale, if it materializes, show how significant the acquisition will be to the sustainable development of Microsoft. The fact that they never rejected the bid opens new forums for discussion hence the consideration of the below steps in the acquisition.
Planning is essential to any takeover since companies’ information and how efficient the firm will be run should be detailed. The management of Yahoo needs to know the vital role the employees play in the running of operations. A renewed faith in the employees and an assurance of maintaining their services will go a long way in convincing both parties of a successful acquisition. The creation of roles for the required top management is equally important to start developing a relationship. Planning embraces the need for continuity in operations, which will ensure cost reductions in matters of training and time consumption.
Although a bid had already been made, we expect Yahoo to come up with new terms of engagement hence the negotiation of the acquisition. However, this can only be attained if we perform due diligence on Yahoo as an entity. The involvement of professionals ranging from legal to accountants and human resources, among others, will be required. The ascertainment of the correct company position is critical to developing a strategy for growth. Information from our professionals on the company will contribute immensely to the decision of acquisition since we don’t want to engage in a company that is generally written off even though it is still in operations in the market. With due diligence, the risk about a company can be ascertained (Savovic, 2013), therefore giving the acquiring firm heads up on whether they are manageable.
The involvement of professionals will also send a message to Yahoo pertaining disclosure of information. The declarations can contribute to the alteration of price on both sides, depending on the new findings and the impact they have on the operations and growth curve. Microsoft has already established the critical role Yahoo can play in increasing advertisements hence additional income stream. Many corporations to be acquired are always reluctant to issue negative information on the company for fear of losing the negotiation advantage.
The information acquired from due diligence of Yahoo will then be fed into Microsoft business plan to ascertain its contribution to growth. Due to the different brands, conflicts are bound to arise, thus the need to strike a compromise that will ensure cost reduction and enable profit maximization to be attained. The Live brands have a lot of intersection in operations with Microsoft, though create income hence plays a vital role in the company’s success. It is an operational route that Microsoft can adapt to Yahoo on board.
Final terms of engagement are also crucial in determining the final decision of the acquisition. A slip in this stage will provide avenues for competitors to bid, thereby throwing to the wind all the hard work done in the various stages leading to acquisition. Cost considerations are also essential considering the process of purchase is not cheap. The invention of multiple negotiators will work to the advantage of the acquirer. Information between the set groups will be attained and passed quickly for efficiency. The Microsoft team will be divided into investment bankers to handle the financial aspect, the lawyers to handle the legality measures, and the managers to oversee the general transition. It will ensure full accountability and lockout prospective bidders with the goal of hostile takeovers.
Shareholders play a vital role in any organization, and their involvement in matters decision making cannot be ignored. Once the signing of the deal is done, the management will move swiftly to convince the investors from Yahoo to maintain their shares with a promise to change their fortunes. A strategic plan should be formulated to persuade the shareholders of structural methods that will ensure returns on investments will be guaranteed. Considering Microsoft already provided an avenue for cash payment to investors, the challenge of convincing most of them to remain on board will be left to their former employees who have been incorporated in Microsoft. Confidence will be enhanced in the shareholders and prospective investors through such engagements with the employees.
Although the acquisition will be successful, further measures ought to be put in place to ensure the company embraces such opportunities in the quest for expansion and profit maximization. It is an approach that will provide the company remains relevant in the ever-changing technology industry.
References
Fried, Ina (2008). Microsoft bids $44.6 billion for Yahoo http://www.cnet.com/news/microsoft-bids-44-6-billion-for-yahoo/
Junni, Paulina & Teerikangas, Satu. (2019). Mergers and acquisitions.
10.1093/acrefore/9780190224851.013.15.
Savović, Slađana. (2013). Due diligence as a critical success factor of mergers and acquisitions.
Actual Problems of Economics. 6. 424-434.