The acquisition community is competitive, and professionals within the field established methods of obtaining accurate cost estimations. Mergers and acquisitions are essential in economies that face monopolies rather than free markets with fair pricing for products. Price domination leads to businesses to pay attention to rivals through purchases and keep product disparities at bay. Profit-seeking has also played a significant part in the establishment of acquisitions in most capitalist markets, especially when monopoly influence can be wielded by players in a given industry. In a bid to obtain a higher market share in comparison to competitors, ambitious entrepreneurs opt to purchase companies. The process of buying and selling businesses must be approved by regulators who oversee the operation of vertical and horizontal integration. Mergers are a characteristic trait of vertical integration, and Anti-Trust Laws established to ensure that all activities in mergers are acceptable and do not infringe on market operations. For example, restricting suppliers from engaging in trade with competitors is considered illegal in the United States and organizations in information science and manufacturing have faced criticism of their approaches. As such, some forms of monopolistic behavior are unlawful while some ways are acceptable. Patenting is one example of competitive legal behavior encouraged among firms. Historically, acquisitions have led to stock price fluctuations and influencing shareholder outlook and perception on prospects. (Schwert, 1996). Valuation and negotiation steps should involve shareholders.
Pricing strategies dictate the process of acquisitions. For example, in the recent trade deal by Disney, Fox sold a substantial amount of its assets to the willing buyer. Despite being subject to regulatory approval, the successful acquisition led to increases in subscribership to Disney online services, which includes obtaining a vast number of customers with interest in sequels, trilogies and series viewed online. The risk components involved in the acquisition include market disruption and mergers and acquisitions theory and practice must incorporate these aspects into its approach. Qualitative elements are explored through program management to improve the process because they identify and explore the strategic interests of any organization in the process of mergers or acquisitions (Weber & Yedida Tarba, 2012).
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The best approach to pricing involves a comprehensive qualitative and quantitative examination of all aspects of firms before the acquisition of a company. Parametric approaches to cost estimation in purchases involve regression analysis which depends on cost estimation and historical data, which is a similar approach to the analog method of cost estimation. Engineering estimation examines unit costs from a bottom-up perspective that, if done over a more extended period, provides accurate costing estimation that can be utilized for pricing assets. Actual costing methods utilize trend analysis to obtain the expenses associated with specific processes and assets, especially in engineering processes. All the pricing techniques used are essential for the pre-acquisition phase, during which intensive due diligence processes that multiple companies undertaken by specialists. Accurate pricing enhances the negotiation process, dispelling doubt between parties, whose principal objective is to increase shareholder value. An acquisition strategy with criteria on choice industries to invest in should be well planned, and financial information should be readily available. Business models should revolve around the best price and appraisals transparent and comprehensive for all parties to appreciate.
References
Schwert, G. W. (1996). Markup pricing in mergers and acquisitions. Journal of Financial Economics, 41(2), 153-192.
Weber, Y., & Yedidia Tarba, S. (2012). Mergers and acquisitions process: The use of corporate culture analysis. Cross-Cultural Management: An International Journal, 19(3), 288-303.
