HR Planning - Merger (Stonewall Case study)
1. In 2008 British Wallboard, the parent company of Stonewall has seen enough of the volatility in the Canadian construction materials market and sells the company to a competitor, US Corp. Its subsidiary, Canadian Wallboard, and Stonewall will merge into one organization. What are the benefits of the merger to British Wallboard? US Corp? Canadian Wallboard? Stonewall? (10 marks)
A merger is a consolidation of two organizations into a single organization. [1]
There are certain benefits that derived from the merger, which would also boost the operations and financial performance of the organization.
Benefits That Will Be Experienced By the Four Companies:
The Stonewall Company and the Canadian Wallboard Company, as the main wallboard manufacturing corporations that are merging would create greater shareholder value than if the two corporations operate separately. The two companies, as the result of horizontal merger, come together to gain a much bigger market share and have access to more customers in the target market, which in turn, strengthens their competitive positions. [2]
There are some other strategic benefits that both companies could achieve through the merger. For example, because of operating synergy (also referred as economies of scale), the new bigger entity (after the merger of Stonewall and Canadian Wallboard) would to be able to save its cost through enjoying more purchasing power when purchasing raw materials and other necessities. Moreover, the merged organizations can share their office space and eliminate duplicate manufacturing facilities. And a merger usually results in employee lay-off as positions become redundant in the new entity so that some labour costs could also be saved. Marketing budgets might be trimmed to achieve better efficiency as well. Furthermore, if the cost of business operation is lower, that cost will be passed on to the consumer, resulting in a stronger competitive advantage as the wallboard market is very price
A merger is a consolidation of two organizations into a single organization. [1]
There are certain benefits that derived from the merger, which would also boost the operations and financial performance of the organization.
Benefits That Will Be Experienced By the Four Companies:
The Stonewall Company and the Canadian Wallboard Company, as the main wallboard manufacturing corporations that are merging would create greater shareholder value than if the two corporations operate separately. The two companies, as the result of horizontal merger, come together to gain a much bigger market share and have access to more customers in the target market, which in turn, strengthens their competitive positions. [2]
There are some other strategic benefits that both companies could achieve through the merger. For example, because of operating synergy (also referred as economies of scale), the new bigger entity (after the merger of Stonewall and Canadian Wallboard) would to be able to save its cost through enjoying more purchasing power when purchasing raw materials and other necessities. Moreover, the merged organizations can share their office space and eliminate duplicate manufacturing facilities. And a merger usually results in employee lay-off as positions become redundant in the new entity so that some labour costs could also be saved. Marketing budgets might be trimmed to achieve better efficiency as well. Furthermore, if the cost of business operation is lower, that cost will be passed on to the consumer, resulting in a stronger competitive advantage as the wallboard market is very price