Introduction
It is essential to determine each aspect to understand the difference between the processes. A merger unites two or more companies, connects the capitals of all organizations, and each company proceeds to exist. The acquisition is a full obtainment, which eliminates companies’ policies and autonomy; the power goes to the company that made an acquisition.
Rationale
Companies striving to merge or run acquisitions are motivated by the company’s potential growth, multiplying efforts to raise revenue, and extending the organization (Tarigan et al., 2018). Additionally, merger and acquisition facilitates bigger profit and helps achieve a financial goal. Undergoing mergers will establish a stronger economic unit and increase profits. The rationale for merging with SABIC is its share in the market of Saudi Arabia, along with constant development and improvement.
The Nature of Merger in the Company
It is beneficial to prefer a merger rather than an acquisition, as merging companies do not stop their activity but are transferred to a new legal entity. SABIC acts as a supplier for the company, and it encourages lower costs of production and increased profit. The vertical merge was preferred to escape competition between the organizations, as a horizontal merger might provoke it between companies.
Opposing Merger to Acquisition
The merger might become a beneficial process for companies due to the list of benefits. For instance, there is no need to involve more human resources, as the extended organization unites all departments in one. Moreover, the organization will save most financial resources and have better credit conditions. If to oppose merging to the acquisition, a merger is a more careful method to expand the organization.
A merger has several drawbacks, which involve the potential suppliers’ refusal to lower prices and the need to renegotiate existing contracts. Indeed, acquisition involves multiple procedures to assess risks, analyze abilities, and other measures. In comparison to a merger, an acquisition might require more complex analysis and cause severe problems, such as complex procedures and huge losses.
Social implications
Indeed, it is essential to consider social implications such as human rights – some employees might be unhappy with new integration policies. Moreover, ethical aspects of social responsibility should consider the values and interests of all employees irrespectively of their origins. Additively, some supply difficulties might arise due to constant political changes in countries.
Conclusion
Overall, a merger and an acquisition were discussed, and there is a significant difference between these concepts. Moreover, the merger has softer conditions for businesses and draws fewer negative consequences. A vertical merger with SABIC might increase the company’s revenues and reduce the costs of production. Furthermore, some social implications might arise, and there is a need to negotiate them.
References
Bisin, A., & Federico, G. (2021). Merger or acquisition? An introduction to The Handbook of Historical Economics. The Handbook of Historical Economics, 1, 15-38. Web.
SABIC. Annual report 2021. Web.
Tarigan, J., Claresta, A., & Elsye Hatane, S. (2018). Analysis of merger & acquisition motives in Indonesian listed companies through financial performance perspective.KINERJA, 22(1), 95–112. Web.