The UK industry Company
The UK industry Company is a much-liberalized sector. The power generating Companies operate freely into the exception of the European Union Legislation that controls their operation. Due to the liberation of the market, mergers and acquisitions have become a common thing. Acquisitions occur when one company produces another company. Mergers on the hand occur when two or more companies combine to form two entities. It is also referred to as pooling of interest. In the UK electricity sector, many firms have acquired others and some have merged to form one single power firm.
Acquisitions and merges bring about certain synergistic effects, which translate to higher profitability. OBJE...
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...CTIVES OF STUDY One of the objectives of the study was to identify the different historical backgrounds of various UK electricity generating companies. Their history was to help in identifying whether the companies have evolved through mergers and acquisitions. Secondly, the study was aimed to analyzing and comparing the profit trends of the firms in question between the time when they were operating as single entities and the period after acquisition and or merges took place.
Any changes would then be useful in concluding whether or not acquisitions and merges give rise to profitability. The other objective of the study was to carry out cost analysts of the companies in question with relevant trends being noted. In other words, whether there are any costs reductions after the business combinations, cost, being a factor of profit determines the trend of profitability. Profitability can also be measured inform of business acumen and customer regulation. The aim of the study would also entail measuring their performances in the European stock market.
Then comes the issue of stock reduction. Using appropriate statistical techniques or approaches. It would also be useful to study how both the business risk and the financial risks of the firms have reacted with the acquisition or merges. The other objective of the study was to find out the reaction of the other firms in the industry after a given electricity company either merged with or acquired another. This is important in establishing whether merges or acquisitions are profitable because rival companies may apply counter-active measures to combat competition.
The research aimed at analyzing both the qualities and quantities aspects of Merges and acquisitions. Before carrying out the research, I first had to answer the question as to why I was in fact carrying out the research. What were my thoughts about the topic to be researched on? I used the quantitative approach to research whereby my focus was on post-positivism. Reduction of all the variables to be used in the study was necessary so as to remain with few but relevant that could form the basis of the final conclusion. I had then to study critically the theory that mergers/ acquisitions result into profitability.
RESEARCH PHILOSOPHY This study tries to find out the effects of mergers and acquisition on the social and economical environment. With the attendant factors of cost cutting there is increased job loss for already existing position. As such, people are declared redundant. Each company has its culture and existing system. But mergers and acquisitions distort these existing cultures. There is also the risk of them not rhyming with Mergers and acquisitions; the identity of already existing companies is bought to questions due to formation of single entities. This might make the company lose its edge in the Market.
Mergers cause a less or reduction of competition\. As such, the quality of service or product is lost. Also, this loss of competition may create exploitation due to existence of monopolies. On the Economic front, the Mergers & acquisitions might lead to capital flight especially if a company indigenous to the UK Mergers into one outside. RESEARCH APPROACH AND STRATEGY The study involved an analysis how the market powers of the companies involved in Merger & acquisition changed For instance, when RWE and VEW Merged in April 2000, their joint market shareholding increased to 70%, from30%.
It also focused on the strengths of the financial statements of the companies in question. For instance, there was a tremendous increase in the profits of Louisville Gas and Electronic (LG&E) after it acquired the UK energy. This was found to be as a result of increased customer Loyalty that saw the combined business entity retain more than 300,000 customers. By using statistical and quantitative tools, it was possible to obtain profit and cost trends that were used as the basis for supporting the main null hypothesis. DATA COLLECTION METHODS In the study various data collection methods were used.
Questionnaires were given to various employees within different cadres of companies that had undergone mergers acquisition contained in the questionnaires was a sample of questions all geared toward establishing whether the Merger/ acquisition had brought any infelt benefits. Data was also obtained from published magazines containing information on the UK electricity industry. ANALYSIS OF DATA The data was analysed using graphs to obtain a trend analysis of the effects of mergers/acquisitions on profit. Pie charts were used in evaluating the market shares of the new entities.
Failure for respondents to give true information was a major setback of the study. Secondly, some of the companies had very complicated historical backgrounds that frustrated efforts to obtain a clear picture of every firm(s) involved. There was also a limitation of manpower as this is a very wide industry in the UK. ETHICAL ISSUES There was need to keep all the information that had been obtained as confidential as possible. It was also found that mergers/acquisitions of two foreign companies can be challenging as the firms might be governed by different rules, policies and procedures.
Some companies do not approach these forms of business combinations with the ethics that they deserve. At times, there exist unfair competitions arising from such mergers and acquisitions.
Springer wien, Journal of economics July 2004, JH Kagel & D Levin. USA Sarah Cook, Steve Macaulay, change a management Excellence, Kogan Page 2003. USA Department of Trade and Industry, Government of UK De Oliveira, Ricardo Gorini and Mauricio Timono Tolmasquim (2004): ‘Regulatory Performance Analysis Case Study: Britain’s Electricity Industry’, Energy Policy, Vol 32, No 11, pp 1261-76