Mergers and Acquisitions Paper Example

One of the reasons companies merge is to increase sales of their products in a certain region by increasing efficiency in the distribution (Gaughan, 2007). Coca Cola is one of the soft drink and beverage companies that have been able to successfully market and establish itself internationally. Coca Cola is argued to operate in at least two hundred countries where its products command a large share of the industry’s market in most of the countries.

Due to the prevailing instability in the Middle east as a result of the conflict between Israel and Palestine, and the alleged use of torture by the united states in its war against terrorism, most countries in Asia and particularly in the middle East have boycotted products from companies that are based in the united states. Coca Cola for example has been accused of funding Israel which resulted to its products losing market in Arab nations. This has caused the company a significant reduction in its profit margins due to the decrease in sales.

The company had initially made large sales of its products in this region mainly because of the kind of climate that prevails in the region. If the company was to make a merger, the first choice would be with a company that is based in the Middle East and produced soft drinks. This company would be Mecca-Cola. The reason I would choose Mecca cola as the company to merge with Mecca-Cola is because it produces the same products as Coca cola (carbonated beverages that are cola flavoured) and is the company whose products are most preferred by most of the Pro-Muslim consumers.

Mecca-Cola which is named after Mecca the holiest city of Islamic religion is based in Dubai and is the most consumed brand of soft drinks in Islamic nations. Mecca-Cola is however only popular in Asia and the Middle East and has not been able to establish a strong market out of this region. Merging with Coca Cola would make it possible for Coca Cola’s brands to be distributed in the Islamic countries especially those in the Middle East hence bring back the sales to what they were. Coca cola would also distribute Mecca-Cola’s products in the places it has established markets.

This merger would therefore increase Coca cola’s sales amongst pro-Muslim regions hence increase its profit margins. It would also help repair Coca cola’s reputation amongst these nations as the company would have to get involved in the charity activities that Mecca Cola engages in that are aimed at helping Palestinian victims of the prevailing war. I would choose Mecca -cola over any other company that is established in the region because of the fact that it has products that are similar to Coca Cola and because of the fact that it is a reasonably large company that operates in sixty four countries.

This implies that it commands a large market share as compared to other companies. Mecca-Cola is the largest soft drink and beverages company in the Middle East hence the best choice as it matches Coca Cola’s international status. 2. How to finance a takeover of this chosen corporation and reasons. A takeover of this corporation would be financed either through borrowings or issuing of new equity. It could also be financed using both of these means. The decision depends on how much money is needed and the company’s present financial situation (Lee & Lee, 2006).

These methods are better than the company using its profits because they make it possible for the acquired enterprise to pay for itself and make profits as it operates without relying on the other already established enterprises as it could drag their growth down. It also enables the management to gauge how fast it is growing and come up with strategies that would help to improve in the event it is not performing as it should (Watson & Head, 2007). 3. The second and third choices for a merger with my SLP company (Coca Cola).

Reason for wanting to merge with these companies, and why they would be second or third choices rather than my first choice. My second choice for a merger would be AGTHIA – Emirates Foodstuff & Mineral Water Company. The reason fore choosing this company as my second choice is because it also is based in United Arab Emirates and would help market Coca-Cola’s products in the UAE and the entire Arab region as coca Cola seems to have a problem distributing and marketing its products in the region which is causing downward pressure on its profit margins especially since sales from this region contributed significantly to the overall profit.

This company also has similar products as Coca-Cola such as mineral water (Gulf Base, 2009). It would therefore be easier to distribute coca cola’s products alongside theirs in the region. The reason as to why this company is the second choice and not the first one is because its core products unlike Mecca -Cola are not the same as or similar to those ones of Coca Cola. This company is also not as well established in Islamic nations as Mecca-Cola is. This implies that the company has a smaller market share in the region as compared to Mecca Cola.

My third choice would be Al Ain Mineral Water Company. This company would be a potential choice because it is established and well known in UAE and the entire Middle East region for providing quality water. This company is also well established in Palestine which has been experiencing shortage of water due to the conflict with Israel. Merging with it would enable Coca Cola to distribute water which is one of its products that fetched high sales in the region before the boycott.

Coca-Cola would also have a chance to sale directly in Palestine and maybe get involved in some charity work in an effort to repair its reputation in the country. Al Ain Mineral Water Company is not the first or second choice because the product it deals with (water) is important especially in the Middle East but not one of the core products of the Coca Company. The main reason for choosing the three companies as potential mergers is because they are based in a regi0on where Coca colas is having problems in distributing and selling of its products.

The merger therefore aims at increasing Coca Cola’s sales and improving its reputation in the middle East. Word count: 1100 List of References Gaughan, P. A. (2007). Mergers, Acquisitions, and Corporate Restructurings. New York, NY: John Wiley and Sons. Gulf Base. (2009). AGTHIA – Emirates Foodstuff & Mineral Water Co. Retrieved 20th June from. < http://www. gulfbase. com/site/interface/CompanyProfileSummary. aspx? C=524> Lee C. F & Lee A. C. , (2006). Encyclopedia of Finance. New York, NY: Springer. Watson, D. & Head, A. (2007). Corporate Finance: Principles & Practice. Fourth ed. New