Riordan Manufacturing Inc. can expand operations through a merger with an already existing company. Some of the benefits of a merger include increased cost efficiency, market shares, and value generation. Mergers also present the possibility of tax gains, capital cost reduction, and an increase in revenues. Even though there are many benefits to a merger, there are also issues that would be considered negative. To evaluate the option of a merger as a means to expand operations, it is necessary to research the strengths, weaknesses, opportunities, and threats with a SWOT analysis.
Merger Strengths Strengths of a merger include the possibility of cost savings, through the reduction of debt for one or both companies. A merger also allows for stable growth of the combined companies. In the event that Riordan merges with another company, both companies can maintain their current customer base, and gain the customers from the other company with customer loyalty. The integration of the two markets will increase the overall market share. Merger Weaknesses
Weaknesses of a merger include the overlapping of management and the attempt to combine two separate product lines. In some mergers, especially in the case that the product lines are of completely different markets, the combination of the two product lines and the management can be difficult. The companies may have organizational cultures and missions that are based on goals that are sending each company in entirely opposite directions. Merger Opportunities One of the greatest opportunities presented by a merger is the prospect of entering into a new industry market.
Not only can the company benefit from the possibility of reducing production costs by manufacturing components internally versus purchasing components prior to production, but also the company can further profits by providing components and completed products to consumers and companies. If Riordan merged with either a trucking company or a bottling company, Riordan could provide raw materials to other companies or effectively ship products to both consumers and companies with little overhead.
Merger Threats Riordan faces threats with a merger as well. Threats include establishing employee morale in during the merger process and post-merger acclimation. Riordan also faces the threat of the competitive environment entered by merging with a company in a different industry. Additionally, an economic downturn in either market poses a major risk for the collapse of both companies.