proposal

Running Head: MITIGATING THE ACQUISITION RISKS 1

MITIGATING THE ACQUISITION RISKS 2

Mitigating the Acquisition Risks

Mekdes Asaminew

Rasmussen Collage

04/27/2020

Mitigating the Acquisition Risks

To: To the Management Department

From: Project Manager KLB

CC: The Planning and Operation Department

Date: 25 April 25, 2020

Subject: Proposed Guideline on the Acquisition Process

Risk avoidance

Kingston-Bryce Limited (KBL) acquisition of her competitor is subject to the legal risk. This type of risk entails the negative consequences the violation of laws and regulations governing the running of businesses (Tanna & Yousef, 2019). With the hasty pressure to acquire the competitor before they are acquired by other rivals in the industry, we would forget to put to consideration business legal compliance procedures which would lead to litigation liabilities. Risk avoidance entails the elimination of business hazards by totally avoiding compromising events. Cognizant of this solution to risks, I would propose that a technical team be formed to assess the various legal compliance needs and striving to meet these needs to avoid instances of legal action against our business. Secondly, the team will ensure that all the party being acquired had no prior legal violations to avoid inheriting a compromised entity. This move will result in avoiding financial losses and reputational damages that result from legal actions.

Risk Transfer

The acquisition process can be marred by the lack of cultural compatibility between the parent organization and the newly acquired institution. This could be characterized by communication breakdown between the new employees and the already existing ones. This incompatibility will result in low employee productivity and the consequent poor organizational performance. Financial uncertainty can also be resulted by the large-scale recruitment of employees. This could lead of business financial incapacitation and the eventual crumbling. Risk transfer is the shifting the negative impact of the uncertain events. Under these contractual agreements businesses are shielded by the adverse effects of some occurrences (Bonaime et al., 2018). I propose that KBL engage in new insurance schemes that will cover the organization in the event that these financial losses affect the livelihood of businesses. This will reduce the likely financial vulnerability of the business.

Risk Reduction

The hasty process to acquire the competing institution before rival organizations embark on the safe processes might result in poor evaluation of the new organization’s assets a situation that would result in overpayment by the parent business firm. Additionally, the process would lead to poor evaluation of employee value and the consequent laying off of key staff and the employment of relatively incompetent operatives. This would result in the weaving of a relatively defective workforce and the consequent poor output of the staff. Risk reduction entails the lessening of the negative effects resulted by uncertainties in the practice of doing business (Li et al., 2018). In our case, the acquisition of a new entity we should embark of outsourcing a competent team that will evaluate skills of new employees against the skills needed in the various new departments. The outsourced teams will also be charged with the responsibility of restructuring departments to enhance efficiency. This will reduce the risk of poor employee productivity and the likely financial and reputational losses associated by the uncertainty ahead.

Risk Sharing

The new development, where KLB will acquire their competitor and the coming hiring of new staff to run the newly established huge corporation could lead to poor staff and poor organizational systems which would affect the existing working cultures exposing the company to financial failures and being outdone by rival businesses. Risk sharing entails the diminishing of vulnerabilities from uncertainties by distributing the negative effects to the different departments and personalities to lower the damage caused on single entities (Green, 2016). To apply this to our upcoming situation, KLB should diversify its production so as to make revenues from some ventures as others suffer a beating from the uncertainties.

References

Bonaime, A., Gulen, H., & Ion, M. (2018). Does policy uncertainty affect mergers and acquisitions?. Journal of Financial Economics, 129(3), 531-558. Retrieved from; https://www.sciencedirect.com/science/article/abs/pii/S0304405X18301338

Green, M. B. (2016). Mergers and acquisitions. International Encyclopedia of Geography: People, the Earth, Environment and Technology, 1-9. Retrieved from; https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118786352.wbieg0196.pub2

Li, K., Qiu, B., & Shen, R. (2018). Organization capital and mergers and acquisitions. Journal of Financial and Quantitative Analysis, 53(4), 1871-1909. Retrieved from; https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/organization-capital-and-mergers-and-acquisitions/E885C3A16B7483E0BE72A98B70954135

Tanna, S., & Yousef, I. (2019). Mergers and acquisitions: implications for acquirers’ market risk. Managerial Finance. Retrieved from; https://www.emerald.com/insight/content/doi/10.1108/MF-09-2018-0446/full/html