Case Study: MRA Associates Inc & Xecodynamics

PART ONE

Organizational structure of MRA Associates

MRA Associates Inc. is a well- managed, reputable, mid-sized engineering consulting company situated in Denver, Colorado. The firm is involved with provision of innovative solutions and consulting services that work to address emerging environmental challenges facing majority of firms, public agencies, and government entities. The subject matter of this research template is a whole discussion entailing how the management of MRA Associates plans to buy Xecodynamics. Xecodynamics is a small company headquartered in San Diego, California, whose line of business is designing and manufacturing components whose usage is to clean up operations at environmentally-contaminated sites. 

The management of MRA Associates views the acquisition of Xecodynamics as a regressive incorporation strategy armed at assisting it to substantially lessen costs while increasing margins and finally delivering more value-optimization to prospective clientele. On the other hand, Xecodynamics approaches this particular acquisition as a venture that will enable it to offset the enormous financial challenges that have been facing it. Thus, a large portion of this discussion paper shall major on highlighting the huddles likely to befall both firms in their pursuit of incorporating culturally and operationally. Secondly, the paper shall undertake to shed sufficient light on the potential merits that would emerge the moment the two firms undertake this move. 

In the introductory part of this paper, it was mentioned the exact location and positioning of both MRA Associates and Xecodynamics. Subsequently, the paper proceeds by discussing the primary tasks, activities, and line of business operations MRA Associates does. MRA Associates is involved with delivery of actionable solutions to prospective clientele- with the core intent of enabling these clients lessen their environmental footprint. MRA Associates is further engaged in specializing in manufacturing wastewater treatment solutions, cleaning up bio-hazards, and remediating groundwater toxicity. Its offices are well spread over 18 different locations mostly in a big metro political regions throughout the United States of America. With time, MRA Associates has managed to devise extensive capabilities meant to assist both in design and execution of breakthrough solutions. The company further relies much on cutting edge technologies in assessment of key/potential problems, designing strategies, and executing solutions- all these enable MRA Association to magnificently manage a variety of clientele environmental encounters in a more cost effective way. 

The structure of MRA Associates, according to Brenkert & Beauchamp (2010) , can be categorized as a “functional structure”. To explain this, CYRIAC, KOLLER & THOMSEN (2012) defines a functional structure as one “that is found in firms where staff members have a tendency to carry out a specialized assortment of activities”. The capability to assimilate such a staff base propels the firm to deliver unique customer service that would obviously outmatch the expectations of clients. Still looking at a deeper look at MRA Associates, Dringoli (2016) informs that each of the eighteen geographic offices normally acts as a standalone profit center, with the mandate of reporting regularly to the headquarter in Colorado and fully responsible for revenue and profit goals. MRA Associates’ major specialization lies in 3 core areas as follows:

Manufacturing wastewater treatment solutions;

Cleaning up of bio-hazards;

Groundwater toxicity.

All the 18 occupied offices of the company contain a technical specialist overseeing these 3 specific areas of specialization. Good enough, the founders of the company are among the top management team, while the regional managers are owners of most firm’s stock. To ensure successful provision of trans-regional services to its clientele, the company undertakes to constantly deploy account managers across offices with specific instructions to work jointly with other regional managers. This is meant to incorporate services across all the profit-center boundaries with view to work with technical specialists drawn from more than one local office. The headquarter office usually steps in whenever disputes arise between cost centers and profit centers. 

PART 2

MRA Associates’ Potential Plan to Purchase Xecodynamics

With the elapse of time, MRA Associates has been contemplating and evaluating the idea of prospective buying of Xecodynamics. Xecodynamics deals in designing and manufacturing components used in cleaning up operations done at environmentally-contaminated sites. Some of these components- utilized extensively in environmental remediation industry comprise of electronic systems including remote automated data storage devices, remote chemical sensors, and ground-level monitors. The major divisions under Xecodynamics include: 1) customer, shipping, and manufacturing support; 2) product testing and development; and 3) customer, sales, and marketing education. Xecodynamics operates by hiring independent contractors who are mandated with installation of products at customer request. 

Majority of Xecodynamics’s sales efforts are endeared on companies such as MRA Associates who reciprocate by recommending Xecodynamics’ products to their clientele base for buying considerations. Normally, manufacturing is operated in a singular service station at the San Diego facility. Majority of the manufacturing employees possess basic high school level education, some are non-unionized staff, while others repeatedly learnt their tasks on their job. The company is proudly owned by 3 personnel- an engineer who came up with original products used to the present day, and 2 other venture capital investors whose line of expertise are not technically trained. During the first seven years after being founded, Xecodynamics witnessed an amazing rapid expansion. This was later followed by a fall in operations and revenue generation characterized by constant struggle to make sales and realize its former gains. Analysts postulate this scenario to factors such as shortage in investment capital which has catapulted the once-enjoyed high sales to low sales, causing the company to stumble to a state of apathy. The second leading factor rotate around the forceful emergence of new competitors into the market who come with newly devised mechanism and possessing massive investment capital- far ahead than that of Xecodynamics. Competition with rival companies has been seen to further exhaust the muscle and the energy level of Xecodynamics since the company has to balance between its operations and revenues while competing with the new rivals. 

Factors that Compelled MRA Associates to enter into Acquisition

Having been trodden down with giants in the industry, it was prudent for Xecodynamics to seek avenues of coming out of its present state using any possible windows of hope. Xecodynamics started by welcoming potential purchase agreements from any well-to-do companies, and in this case, the number one sought-after firm was MRA Associates. There are several compelling factors that might have triggered Xecodynamics’ decision to consider amalgamating with MRA Associates. One, holds a vast influx of cash resources that can allow it to cater for its own welfare and that of Xecodynamics even after buying it. The cash resources owned by MRA Associates are so large that analysts view that it can potentially buy 5 companies and run them continuously for a span of 5 years before any of the cash reserves start being depleted. The second dominant reason lies in the fact that MRA Associates possesses amazing, unmatched and competent management expertise comprising of top doctorates, learned, and experienced gurus in the field of management. Actually, it is well known that the management table of MRA Associates houses only the best the market could offer. Such management team of experts are so competent that they can always forecast the direction in which a company is heading, and provide a solution in case a company is likely to fail. It was natural enough for Xecodynamics to believe that MRA Associates’ leadership could alleviate their then-present situation by assisting the firm to better respond to the market needs considering its well-designed components. 

Xecodynamics hoped that it was time to kill and bury its incessant leadership struggles that have blurred the company’s vision and mission. Working jointly with MRA Associates was the only avenue, according to the introspective of GOEDHART, KOLLER & WESSELS (2010) , through which Xecodynamics’ future direction will be moderated in a harmonious way without necessarily injuring its progress. Xecodynamics further admitted that MRA Associates was a much stable and older company- that has accumulated enough resources, manpower, skills, experiences and could thus withstand the storms that come from time to time. This can be better said that Xecodynamics felt safe operating under the umbrella and cover of MRA Associates. To a certain extent, it was as though MRA Associates was a monopoly in the market whose clientele base was so huge that the firm could dictate the price mechanism. This meant that no other company had the capability and the muscle to easily outdo MRA Associates. Being acquired by MRA Associates, therefore, could go a long way to even stabilize the prices of Xecodynamics. This meant that more sales were to be made, leading to a meaningfully large revenues and proceeds. 

The Key Factors to Consider before seeking to Acquire Xecodynamics

On its part, MRA Associates signed into effect the move to acquire Xecodynamics without too much compromise. This could have been fueled by several reasons and justifications. One of such reason is that MRA Associates firmly believed that acquiring Xecodynamics will give it a distinct advantage in terms of market and product value. MRA Associates’ product value could increase and improve since more products could have been added to its list of products. Having additional products further designated that many clients would come to ask for Xecodynamics’ products while at the same time buying MRA Associates products. In this highly competitive industry, the acquisition of Xecodynamics will definitely boost and enhance the brand image of MRA Associates to the world, whereby it will be seen as a real technological innovator. Tied to this is the fact that Xecodynamics has ways coveted MRA Associates’ clientele list since they are seen as high valued potential clients. 

According to the point of view of MRA Associates’ management, the addition of products will resultantly offer a newer profit platform and stream for the technical personnel at MRA Associates to devise and create wonderful innovative products whose mode of manufacture will always be done in-house. It must be noted that the current Xecodynamics’ venture capital owners affirm that they can considerably make major desirable changes in the profitability aspect of MRA Associates, provided they join the excellent management team. The choice of adding value to the combined company will work best for MRA Associates by eradicating redundancies and improving overall revenues. It will allow MRA Associates to take gain of supplementary distribution channels that will allow MRA Associates to leverage more effectively with the products and services. MRA Associates has sought to acquire existing technologies and business processes that would otherwise be costly for Xecodynamics to develop individually. 

Outsourcing by MRA Associates after Acquisition of Xecodynamics 

The number one issue that can potentially arise following the decision to outsource is just more ethical in nature. Evidence drawn from the case analysis of the two organizations affirm that a vast portion of employees working at Xecodynamics are specialized in manufacturing, and so can be termed as manufacturing staff. The puzzling and disturbing question that emerges here is this: would it be ethical, right, and humanly possible to kick these precious employees out after laboring so hard to work for Xecodynamics all these years? In the lens of GOEDHART, KOLLER & WESSELS (2010) , this is not just a light move since it can invite the intervention of labor rights activists. Consequently, Xecodynamics might attract more attention from the media, the public, and other humanitarian organizations after being featured in the media that it is throwing off its long-standing employees since it is eventually being swallowed up by MRA Associates. At MRA Associates, key mention should be made to distinguish out the fact that, most likely none of the manufacturing employees working at Xecodynamics would be needed there. This is because MRA Associates already has enough working staff with whom the company has already entered into a collective bargaining agreement (CBA) pertaining to their work conditions, salary payments, remunerations, pensions, and other related aspects touching on workers’ welfare. Sure enough, it is common sense that all these considerations are not going to be forfeited or broken by bringing in a group from Xecodynamics. This therefore become a point to ponder first before Xecodynamics allows itself to be purchased by MRA Associates. 

What comes out of the above assertions is the ugly publicity that would automatically be painted on the name of MRA Associates and Xecodynamics. Now that MRA Associates seeks to heavily invest in acquisition of Xecodynamics, it would be prudentially good for MRA Associates not to outsource initially the moment it enters into agreement with and buys Xecodynamics over. Just in case it becomes apparently clear in the subsequent months that merits of outsourcing would outweigh the demerits, then this implies that MRA Associates would diligently chase the outsourcing strategy in phased and planned manner. 

Harty et al (2002) contends that the choice to either outsource or not should be firmly embedded in MRA Associates’ insatiable desire to perform most and/or its activities in-house. One of the factors to put in mind is to accurately determine the strategic value of activities being done by the outsourced staff. This denotes that in case the outsourced staff are coming to do the work that can be done by the existing workers, then the move would be unreasonable. In case there is a greater need for having new staff members who basically come to fill the gap created by the introduction of new manufacturing processes, then outsourcing would be highly recommended. The second determinant to outsource lies in the relative competence of MRA Associates as compared to the best suppliers. This designates that, MRA Associates should consider the implications of its newly acquired staff to its operations. The firm has to consider whether these new workers’ skill and competencies contribute to the operations of the firm. MRA Associates has to determine the output of its products and gauge the percentage output of the workers to the final output. The company should be sure of the contribution of the workers to the manufacturing process with regard to what comes out and sold to supplies.

The view given by Leaver, Ehrman & Shekhtman (2005) is that MRA Associates should consider outsourcing basing on the aim of making all its fixed costs variable. This would give the firm the right capability to provide greater product varieties and be in a position to manage complexity in a more effective way. MRA Associates can likewise lessen the cumulative costs while at the same time being able to assess the innovation power vested in its suppliers. Once this done, MRA Associates can then easily gain access to flexible capability and technology. The choice, the decision, and the goal of outsourcing should be not be made blindly since enormous implications are bound to arise. It would be prudent for MRA Associates to consent to the truth that the capability to identify and mitigate key risks in advance stages will go a long way to increase the chances of a successful aftermath. 

In this sub-section, the paper examines some of the common reasons that are mostly associated with failure of outsourcing. For a firm to avoid failure in any particular sector, Michael Porter always advises such a firm to know the background factors that can lead to such a failure and then avoiding them completely. The number one reason lies in unsatisfactory interface management. The second reason is the occurrence of an imbalance in the merits to the involved parties. The third reason is the lack of striking financial transparency whereby the stakeholders cannot be able to determine the benefits and the costs that have accrued to the firm after its outsourcing. This puts MRA Associates at a dilemma angle since all the stakeholders and shareholders would want to see increased profits because MRA Associates has heavily invested in outsourcing. The forth reason lies in poor supply of chain risk management in certain areas such as sustainable adherence and security of safety and supply. The fifth justification is outsourcing of immature and non-optimized processes. The final pitfall of risk of outsourcing is failure to forecast with reasonable accuracy. As the medicine to all these, MRA Associates is recommended to make forecasting of outsourcing a cross-functional, collaborative and institutionalized process ( Mackey & Gass, 2012; YIN, 2009).

The Impending Causes of Failure of Acquisition & how to effectively counter them

Besides the operational drawbacks likely to befall MRA Associates following the acquisition, it would be noticed that the more pressing challenges are cultural in the making. This is justified on the grounds that majority of the employees at Xecodynamics only attained a high school level education, some were just privileged to learn their tasks on the job, and some are hourly and non-unionized staff members. Unfortunately, it appears that MRA Associates would have a problem and sufficient experience dealing with and managing this group of employees drawn from Xecodynamics. Additionally, it will be a bit hard for MRA Associates’ technical specialists and account managers to work harmoniously with Xecodynamics staff mates on a good platform ( Mennillo, Schlenzig & Friedrich, 2012) . 

The number two cultural issue revolves around Xecodynamics management. In the aforementioned part of this paper, it was discovered that the two-venture capitalists have faith in the fact that they can make critical changes in MRA profitability, the moment they join the MRA management team. Since Xecodynamics is relatively smaller in scale and size as compared to MRA Associates, it is unimaginable to speculate the kind of roles these two venture capitalists will be given on the new board of MRA Associates. The forthcoming issue is that in case there shall be incidences of tension between the 2 parties, a rift would be created, and would consequently unsettle and even impede the overall profitability at MRA. This will also impact on the power equation existing in both firms. Naturally, the management personnel drawn from Xecodynamics are likely to feel undermined and undervalued as compared to those management personnel would be comfortable with any decision they make. 

In a nutshell, the MRA management team ought to exercise caution while embarking on their move to accommodate the top management from Xecodynamics. What is most desired is to have a frictionless and harmonious affiliation between the two, which will be fundamental to the success, wellbeing and progress of this acquisition. From history, it has always been witnessed that mergers and acquisitions have been an ingredient for looming disaster. Excluding only a few cases, which have been recorded to operate with brilliant planning, majority of mergers and acquisitions always end up destroying more value as compared to the level they could individually create. It becomes expensive to transfer specified knowledge, whereby this particular transfer of knowledge can considerably propel the decentralization of decision rights. According to the view by Leaver, Ehrman & Shekhtman (2005) , decentralization is bound to generate the rights assignment and more complicated control problems. Since it may not be possible to neglect agency problems, the move to assign decision rights to various individuals who possess the pertinent knowledge capabilities will definitely increase organizational competence.

The Big Need for Acquisition & the Right Process to Follow

MRA Associates intents to protect its stream and flow of revenue. The company management discovered that one of the best ways of increasing its annual proceeds is through acquiring another smaller company. Inasmuch as MRA Associates acknowledges that there are some challenges likely to arise after acquiring Xecodynamics, the benefits are bound to outweigh the disadvantages. The strength of MRA Associates will also solidify and grow. The profitability of MRA will further grow and reach optimal levels. Based on the proposition by Mackey & Gass (2002) , there is the potential for MRA Associates to realize increased shareholder value. Shareholders of any company are always interested in seeing their company improve, and it does not matter which route they use, provided there is steady and constant increase in shareholder value. Shareholders of MRA Associates will benefit exceedingly after realizing that the shares of its company have been merged with the shares of Xecodynamics. 

One of the reasons the management of MRA Associates will like the idea of acquiring Xecodynamics is to economize on product and investment diversification. Diversifying the products of the two firms is a move that will bring a related increase in value chain of the dominant company. Financial analysts have projected that this acquisition will considerably reduce foreign exchange risk- a risk that occurs when a company engages in international trade links. Based on the writings of GOEDHART, KOLLER & WESSELS (2010), foreign exchange risk alone can kill a company due to the failure to balance its products and services delivery to various nations and clientele across the globe. Doing this is bound to increase and concretize the financial position of MRA Associates, and consequently ensure that the company’s financial position remains steady in the future. Closely associated with this is the tax operational efficiency which will be realized when the taxes of the new entity are taxed out of the accumulated vast cash of the company. Having acquired Xecodynamics will imply that MRA Associates will have easier time since taxes such as corporation tax will not negatively affect the remaining cash reserves after the process of taxation has been completed. 

MRA Associates will easily achieve admirable economies of scale in its quest to acquire Xecodynamics. Economies of scale will become a central revenue booster for the company since now it will manufacture more products, deliver more sales, and resultantly reap more benefits in terms of profits and revenue. Economies of scale will propel the firm to hire more staff members to man various manufacturing processes done in the company. With time, the company may also seek to expand its premises and the work area to cater for the increased processes that should be completed in batches. Having economies of scale will bring synergy into MRA Associates. Synergy here refers to coveted combined efforts of two firms that ensure that the newly formed firm is now stronger than the former, better, well-positioned and operating at higher efficient levels than before. Synergy is one of the observations economists always seek to see in any company that acquires another; and many attribute synergy as one of the signals that typically show that acquisition was successful and favored a company that went into acquisition. Synergy will automatically place MRA Associates far above and ahead of other companies dealing in the same line of industry, and therefore, any cut-throat competition will not shake MRA Associates due to its increase market power ( Dringoli, 2016 ). The ultimate goal of synergy is to ensure that no entry barriers will stand on the way of MRA Associates. 

Restructuring the organization after Acquisition

One of the fundamental aspects that should be considered to form part of the outsourcing process is how MRA Associates plans to restructure the company’s architecture after acquiring Xecodynamics. It is known that Xecodynamics was a different firm operating on its own and founded on its own, with its own headquarters, its own location of operation, its own staffing, its own trusted clientele, and its own vision and mission. Taking over Xecodynamics is not a baby-step thing that can be done in once, in a day or in a week, but rather, a detailed and tedious process. Reasonably, there must be a calculated plan outlay that would factor in place the whole process from A to Z, without leaving out or skipping any phase. Failure to do this can considerably injure MRA Associates’ progress. 

The first tenet involves managing employees after acquisition. Whether MRA Associates will go for outsourcing or not, how it manages its employees after acquisition and expansion will dictate its speedy progress. Now that tasks and activities to be performed have increased, naturally, it would instrumental for all the employees to be assigned new tasks, roles, and responsibilities in accordance with their skills, competence, and experiences. What follows is the remunerations and pay schemes to be enjoyed by all the employees. Employee engagement will be critical because employees will be categorized into: actively engaged, moderately engaged, and highly engaged. The second consideration will involve involvement of analysts and specialists with independent goals and precise expertise; a move that should lead to manifold fragmented perceptions of the agreement. The third consideration deals with increasing momentum with which each deal should be done, since integration is not something that should be hurried. This implies that the phases of signing documentations and legal papers should be done under the watch of the right personnel where nothing is taken lightly. In case there are issues to involve banks and legal chambers, the personnel from banks and the lawyers should be called upon to be witnesses and affirm their consent accordingly. The views, perspectives, the advice, and the counsel from the right stakeholders, management team, top leadership, and shareholders drawn from the two companies should not be assumed during this critical process. The fourth consideration touches on how the seller of Xecodynamics and the buyer of Xecodynamics should resolve important areas of ambiguity first before proceeding to complete the agreement. This is because, there might be pending bills, unpaid loans from financial institutions, unresolved court cases, hanging legal issues, unpaid overhead costs, suits by other parties affiliated to Xecodynamics ,or any other (related) issue that should be solved first. Negotiations should be done procedurally, cautiously, and diplomatically to ensure that the end result is a win-win for both the organizations. In case these elements are not addressed one by one, certain factors may crop up and affect the acquisition process, even if it means extending for a protracted duration. 

References

Brenkert, G. G. & Beauchamp, L. T. (eds.) (2010). The Oxford handbook of business ethics . Oxford: Oxford University Press. 

CYRIAC, J., KOLLER, T. & THOMSEN, J. (2012). Testing the the limits of diversification. McKinsey Quarterly: The Online Journal of McKinsey & Company [Online]. Available: http://www.mckinseyquarterly.com/newsletters/chartfocus/2012_07.html .

Dringoli, A. (2016).  Merger and acquisition strategies: How to create value . Cheltenham, UK ; Northampton, MA, USA : Edward Elgar Publishing. 

GOEDHART, M., KOLLER, T. & WESSELS, D. (2010). The five types of successful acquisitions. McKinsey Quarterly: The Online Journal of McKinsey & Company [Online]. Available: hpps://www.mckinseyquarterly.com/article_print.aspx?L2=5&l3=4&ar=2635

Harty, R. P., Brandenburger, R., Drauz, G., Gilbert, R., Kovacic, W. E., & Vickers, J. (2002). Mergers and acquisitions.  Annual Proceedings of the Fordham Corporate Law Institute, 2001,  219-267. 

Leaver, B. L., Ehrman, M. E., & Shekhtman, B. (2005).  Achieving success in second language acquisition . Cambridge, UK: Cambridge University Press. 

Mackey, A., & Gass, S. M. (2012).  Research methods in second language acquisition: A practical guide . Chichester, West Sussex, U.K: Wiley-Blackwell. 

Mennillo, G., Schlenzig, T., & Friedrich, E. (2012).  Balanced growth: Finding strategies for sustainable development . Heidelberg: Springer. 

YIN, R. K. 2009. Case study research: design and methods . Los Angeles, Sage.