The 21 st Century business environment is characterized by immense competition and dynamism which has changed trade into a game of growth that entails struggling to gain the highest market shares over the competitors. Some companies often opt for the most common shortcut to growth by using merger and acquisition. From a generalized standpoint , the main motive behind acquisitions is business stability, increased market share and, the maximization of the shareholders’ wealth. The acquisition is governed by a principle that assumes that merging two companies improves the overall worth of each participant. According to Tamosiuniene & Duksaite (2015) , acquisition can be described as two or more firm merging by offering the shareholders of one company securities in exchange for shares. Signet Jewelers is a good example of a company that has expanded its growth through acquisitions. Today the leading diamond retailer in the US operates over 3500 stores under brands of Zale’s, Kay Jewelers and, Piercing Pagoda among others. Since acquisitions are meant to benefit both parties, it would be imperative to determine the best acquirers for Signet by analyzing their pros and cons. The paper identifies Signet acquirers and discusses the best choices by determining how the parent company could add value to the acquirers.
In an ideal situation, acquisitions should benefit both participants, and thus the decision to merge should be preceded with thorough research to identify a company with beneficial features but are lacking at Signet. This point is well-demonstrated by Signet’s move to acquire the R2Net’s brand, a first-growing diamond online retailers. R2Net has access to unique technologies like the proprietary 360 degrees display tech as well as virtual ring sizer among others. These technological innovations attract a wide clientele from all over the world (Halzack & Tan, 2017) . Therefore, the merger between Signet and R2Net allow the former to benefit from these resources in return R2Net gained significant market power arising from the general reputation and image that Signet has built over the years.
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Even though Signet has been praised for coming close to controlling the diamond industry, some experts believe that the company is fast-paced growth is unsustainable and might be a prediction of failure in the long-run. These claims have not been proved but it would be practical to get ahead of the situation and think of ways to salvage Signet in the worst case scenario. One way of accomplishing this goal is by seeking the good acquirers. At the moment, some of the companies that can be good acquirers for Signet are mining companies like Lucara, Dominion Diamond Corporation and, Debswana Diamond Company. From a generalized standpoint, a mining company would be a good buyer for Signet which is a retailer with a 15 percent market share as the acquisition allows both firms to the maximum control of the supply chain. Note that the main product offered by Signet are high-end Diamond Jewelry . Since they are classified as luxury goods, meeting or bypassing customer expectations is mandatory. The most obvious way of attaining this goal is by ensuring the availability of a variety of quality products at all times which means that the company should have an assured supply of raw materials.
Debswana would be a good acquirer for Signet because it has the financial capacity and resources to ensure a continuous supply of raw materials at relatively low costs. Note that Debswana's main operations are located in Africa giving the firm the advantage of cheap labor coupled with few restraints in terms of environment and mining policies. However, Debswana’s reputation has been tarnished by claims of human rights violation in what is often referred to as the ‘blood diamonds .’ By acquiring Signet, Debswana would be setting a path to rectify its image by offering some level of transparency which creates a perception of positive reforms. Furthermore, Signet would be valuable to Debswana as it has access to the technology and resources that add value to raw materials which translate to high-profit margins for both companies. This point is well demonstrated by considering Signet’s acquisition of R2Net which gave the organization access unique technologies like the proprietary 360 degrees display tech as well as virtual ring sizer among others. Once Debswana acquires Signet,, it will have access to 360 display tech which would be critical in increasing the overall value of the final product. In summary, the acquisition of Signet would set Debswana on a path of expanding the profit margins.
Other than mining companies, Signet could be acquired by jewelry retailers like Walmart, Macy and, Sterling Jewelers Inc. Both of these companies occupy the top five jewelry giants in the US. Among the three, Walmart and Sterling would make good buyers for Signet because they have the financial capabilities. Acquisition by Sterling would increase Signet’s market share because it deals with a wide variety of products including gold and silver. Furthermore, Signet would benefit from Sterling’s marketing strategies that have seen the firm’s profit margins over the years. However, an increased variety of jewelry might dilute Signet’s brand which is based on offering the best quality diamonds to its customers.
In general, acquisitions are associated with a myriad of advantages and downsides. Thus a company has to consider an array of factors before deciding to merge and devise tactics meant to suppress the demerits to avoid unnecessary losses. Signet serves as a good example of companies that have achieved immense growth through acquisition despite the existence of criticism that the organization is crumbling . From the presented argument, Signet could make significant improvement by acquiring companies that supply the raw materials to ensure continuous availability and variety which contribute to the positive customer experience.
References
Halzack, S., & Tan, G. (2017, August 24). Signet's Diamond Deal Shines Bright. Bloomberg Opinion . Retrieved from https://www.bloomberg.com/gadfly/articles/2017-08-24/signet-smart-jamesallen-com-purchase-may-be-best-surprise-of-all
Po, D. (2015, December 4). Benefits of mergers and acquisitions to strategic buyers and impact on post-merger integration. Source M&A , pp. 1-2. Retrieved from http://app1.hkicpa.org.hk/APLUS/2015/12/pdf/44_Largesource1.pdf
Tamosiuniene, R., & Duksaite, E. (2015, September 23). The Importance of Mergers and Acquisitions in Today’s Economy . pp. 11-24.
