An acquisition is a corporate transaction where one company purchases another company’s shares or assets

An acquisition is a corporate transaction where one company purchases another company’s shares or assets

An acquisition is a corporate transaction where one company purchases another company’s shares or assets (“Acquisition – Definition, Overview and Pros/Cons of Acquisitions,” n.d.). According to a source, the Bank of America became US’s largest mortgage lender in the same year it was acquiring Merrill Lynch & Company Inc. At this time, the CEO of Bank of America was faced with some challenges in terms of decisions to be made. As the head, he was expected to calm down the situation and assure the investors and shareholders that everything was fine, that being pessimistic was not necessary. The major problem was that with this acquisition, there was little planning considering that this move was a big one.

The bigger problem, in this case, was that some of the people were not entirely convinced with the idea of undertaking such a risk and having this transaction going on. Merrill Lynch & Co was performing poorly and on the verge of total wipeout. The CEO, Mr. Ken Lewis had a big task of making the investors feel motivated and look forward to the promised savings of 7 billion dollars. Moreover, there could arise conflicts in terms of work culture and payment systems between the two workforces of the two companies. The manager can try to sit down with his team and rethink the decision well, carefully scrutinizing every variable on the table. That is, the concerns of the investors, securities to be transferred, mode of payment and how to deal with the two different workforces and also come up with a leadership structure accepted by both companies.

Pessimism was still growing among the investors, and now the manager was at a crossroads especially after seeing Merrill’s balance sheet showing unwanted information. Also, the manager did not know how to break the news to the board about the risks involved in calling off the merger, and this had pressure on him. At this point, the manager is faced with a decision of whether to accept the alliance and have hope the promised earnings will be realized or revoke and call off the merger at the expense of his job and the top management officials. This decision is a hard decision as it entails whether to choose personal interests or national interests. With the short-term problem being having pessimism as the mood in the company and frustrations, the long-term would be whether the two companies would integrate fully and become one to achieve the set objectives fully.

They were operating at a loss, and the CFO of Bank of America estimated that in the last quarter of Merrill’s financial year, the damage would rise to 12 billion dollars. The next course was to try and revoke the merger to shield them, Bank of America, from any bad. After this thought was spoken, communications between the two CEOs and officials at the US Treasury followed, but it backfired on Mr. Lewis as pressure was mounted on him from the Department of Treasury. With the decision to revoke the merger, there were risks to the entire US financial system, and also the US government would seek the removal of the top management including Mr. Lewis from the bank.

The performance of Bank of America would lag if the merger went ahead considering the financial situation of Merrill’s. This merger would have tremendous effects on the company in terms of the share price and also a shareholder’s well-being. The company growing at that slower rate will discourage investors, and the remaining ones might opt to sell their shares and leave the company due to frustrations.

Another problem was the conflict between Lewis’s obligations to his shareholders and the country. Legally, he was required to disclose any information to the shareholders who were relevant to their interests without any disclosure. By the time the decision about the acquisition was made, Merrill’s fourth-quarter losses had not been put on the table, and so Mr. Lewis wanted this information to be withheld from the shareholders. But the manager was later advised that such disclosure would disrupt the stability of the financial system.

Solutions to deal with the problems can be first to deal with the pessimism that is growing. The manager could be proactive and talk to the group that is not entirely convinced to change their behavior. This move can be by pulling them aside and telling them how their comments towards the merger are affecting other investors or better yet show them the strategies in place to make this merger work. Another solution would be the manager together with chief financial officer going through the Merrill’s financial documents to know what they are dealing with and in turn, have a right answer or proposition for them and the shareholders too. This move will help the manager make a sound decision so as not to drag the company’s performance down by wanting to save the other company. Besides, there is also the aspect of the manager having tough conversations with the parties associated. In this case, the manager was to talk candidly with Mr. John and get to know what led to the company’s low performance and their current situation. Also, the manager should face his board and shareholders and tell them the terms that are on the table in regards to either accepting the deal or rejecting it.

These solutions can be implemented before the merger goes through as they will be the foundation of the acquisition process. They will help form the base for making informed decisions by the manager and the shareholders too. Though the management might not generally accept some, it’s worth trying and convinces them. Giving them the pros and cons too can help in reaching a quorum. For all the above solutions to work he must be willing and also his influence should help him convince the board.

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