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The terms merger and acquisition imply two different things. Acquisition refers to a situation where a company takes over another established company and establishes itself as the new owner of that company (Anonymous, 2010). The company which has been taken over or swallowed by the new company therefore ceases to exist. Merging involves two separate companies which opt to come together and form a new single company and is often referred to as the merger of equals . However, for a merger to exist, the two companies must often be about the same size. Take over (acquisition) can either be friendly or hostile depending on the circumstances.
The motivation behind the merger/acquisition between Interclean and EnviroTech was that the company wanted to consolidate its markets and gain a competitive advantage in the industry. Interclean wanted to provide its customers with a full range of service packages which met the individual demands of its clients. Interclean also wanted to be in position of forecasting and acquiring a different line of business that will help it build a cutting edge through reduction of competition across the industry (Barney et al, 2009).
There exists five types of merger/acquisition namely, Conglomeration, vertical mergers, horizontal mergers, product expansion mergers and market extension mergers. Horizontal merger is case where two companies who directly compete and serve the same market opt come together for the purpose of serving the market as one entity. Vertical merger happens when the organization decides to merge with the customer or the supplier. Conglomeration is the merger of organizations which do not share the same market or even sale related products. Product extension merger entails merging of companies which sell related products to serve a common market. Market extension merger is executed between two companies which sell products that are related but in different markets (Anonymous, 2010).
The kind of merger that existed between Interclean and EnviroTech was a Horizontal merger because Interclean Company and EnviroTech were two separate companies which offered the same products and served the same market.
The challenges that Interclean and EnviroTech merger will face as result of their merger and acquisition is that they will have to convince their clients that they havent sold their businesses or company by making them feel the same or better. The clients will not feel good when they discover that the company they have been dealing with has been sold out or acquired by another company and therefore the biggest challenge that will face these companies is convincing the customers that they are still the same people. Another challenge that will be forced by this merger and acquisition is that the company will have to try by all means to reduce anxiety among it sales personnel (Anonymous, 2010).
Mergers and acquisitions should therefore be done in a way that takes in the interests of the customers, the employees and all the stakeholders so that all the business ideals that were represented in the parent company continue to exist. Failure by companies to take in the interests of the stakeholders involved often lead to reduction in sales and therefore making the merger and acquisitions to be a raw deal. The top management should therefore take into consideration all advice from the stakeholders with a common view of improving the image and income of the new company.
References
Anonymous (2010). Waiting for a wave. Web.
Barney, J and Hesterly, W. (2009). Strategic Management and Competitive Advantage (3rd edition) New York: Prentice Hall.
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