Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?

Candidate Number: 003257 – 017

Should Manchu Inc.

and Company X Inc.
merge?

November 2010
Word Count: 3932
Candidate Name: Amit Shemesh
Candidate Number: 003257 – 017
Centre Name: Island School
Centre Number: 003257

1
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

Acknowledgments
I would like to take this opportunity to thank Mr. D for allowing me an
insight into his company Manchu Inc. I would like to thank the Hong Kong
Central Library for available research material. Finally, I would like to thank
Mr. Robert L. Meyer for assisting with proof-checking the essay.

*The management of Manchu Inc. and Company X inc. stipulated that

specific figures as to private information would not be given and therefore
could not be part of the discussion in this analysis

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Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

Table of Contents

University at Buff

Table of Contents
I. Abstract..................................................................................................................................... 1
II. Introduction/ Rationale..................................................................................................... 2
III. Methodology:........................................................................................................................ 4
IV. Advantages of a Merger..................................................................................................... 5
V. Disadvantages of a Merger................................................................................................. 7
VI. Lewin’s Force Field Analysis.......................................................................................... 10
VII. Evaluation.......................................................................................................................... 14
VIII. Conclusion and recommendation............................................................................. 15
IX. Appendix.............................................................................................................................. 16
X. Work cited............................................................................................................................. 18

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Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

I. Abstract
In the following investigation I will analyze the possibility of a merger between two
businesses: Manchu Inc. and Company X Inc. My research question is ‘Should
Manchu Inc. and Company X Inc. merge’. Manchu Inc. is a Liberia incorporated
company registered to do business in Hong Kong. Company X Inc. is an
incorporated company in China. This question is relevant to as the businesses
have worked with each other for 13 years, both share the objective of growth in
terms of profitability, and are currently looking into the possibility of a merger. In
order to investigate this I will look into both businesses by carrying out an interview
with the CEO of each company and some senior executives. Also, I will use my
business course book and other merger focused books as guides. After collecting
relevant data I will classify it into ‘advantages’ and ‘disadvantages’ and weigh them
in order to see which are more important. After this, I will carry out Lewin’s Force-
Field Analysis, a useful technique for looking at all the forces for and against in
making a decision. This is a method of weighing ‘driving-forces’ and ‘restricting-
forces’ 1in order to see whether a merger is worthwhile for these businesses. In my
findings I discovered that the success of the merger will mainly depend on the
motivation of the employees. From interviews I discovered that the employees are
motivated and the working environment in both businesses is collegial. If the
companies follow their merger plan, the merger should succeed. I conclude that
the two businesses should merge. I base this decision on the fact that the
companies know each other and have worked together for 13 years, the executive
team energy is described as ‘phenomenal’ 2 by CEOs, and there is a strong will
between the companies to merge.
(300 words)

1
http://www.mindtools.com/pages/article/newTED_06.htm
2
Appendix - Interview CEOs
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

II. Introduction/ Rationale

‘In business there is often one simple rule: grow or die’ 3
A merger is a combination of two companies.4
In the following report I will review the question: ‘should Manchu Inc. and
Company X Inc. merge?’
The two most common reasons for companies to merge are to (i) promote growth
and (ii) achieve synergy. A merger can enable the companies to grow in at
accelerated rate and, in this case, is a faster way to grow then internal
development.5 Synergy enables the concept of “1+1=3”. In Manchu and Company
X it might create management and revenue synergy.
Mergers are becoming increasingly frequent as a growth strategy in order to fortify
and maintain an organization's market position in today's increasingly competitive
economy. Merging is a rapid way for a company to reach new markets and
increase its market share and profits. It is a way to accomplish its growth
objectives.

The company Manchu Inc. was incorporated in Liberia and established in 1983 in
Hong Kong as a garment trading company.
Company X Inc. is a private company in China, operating in the sectors of
garments and textiles. It has significant relationships in both industry and
government sectors in China. This gives it an immense advantage in terms of the
ability to communicate and understand their business environment. 6
Like any other strategic move by a company, mergers and acquisitions are very
likely to fail if not planned and executed correctly. "70 percent of mergers fail to
achieve their anticipated value"7.
3
Mergers And Acquisitions From A to Z By Andrew J Sherman
4
Business and Management Course Companion By Paul Clark
5
Mergers What Can Go Wrong And How To Prevent It By Patrick A Gaughan
6
Appendix – Interview CEOs
7
Weekly corporate growth report
http://www.interlinkbusiness.com/artmergers.html
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

In this report I will use advantages, disadvantages and Lewin’s Force-Field

Analysis as analytical tools in order to make a decision as to whether Manchu Inc.
and Company X Inc. should merge.

This document will asses the opportunity of merger between Manchu Inc. and
Company X Inc. using situational analysis in terms of driving and restricting forces
of the two companies, and assessing whether the merger will have a positive
effect on production, sales, synergy, reducing costs and will enhance human
resources of the companies. To identify driving and restricting forces, I will
evaluate its internal positioning to determine what it does well and what it does
poorly, and how a merger would be useful to it.

A merger forms when two businesses agree on friendly terms to join their
companies in order to establish a new and better operating business. Mergers are
an increasingly used tool for fast non-organic growth. They are an effective way to
enter new markets and obtain a larger exposure and a greater market share.
Mergers involve a great deal of uncertainty for business owners. In the businesses
I will focus on realignment of the structure of the workforce can be a great difficulty
and a challenge to the owners8. Furthermore, since both businesses are small and
the workforce is very close and the working environment is collegial, the resistance
to change might be high and staff will be demotivated due to the risk of
redundancy of their fellow employees.9

8
Appendix – Interview CEOs
9
Appendix – Interview with senior executive team employee.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

III. Methodology:
Collect relevant primary research data by interviewing both business owners and a
senior executive team employee. Analyze and summarize relevant data.
Secondary research data will be used from mergers online business reports,
business theory books:
(Business and Management Course Companion, Mergers: What Can Go Wrong
And How To Prevent It, Mergers and Acquisitions From A to Z)10

Primary Research:
 Interview both owners of Manchu Inc. and Company X Inc. 11 This will
help to obtain a better understanding as to what each business does well
and what it does not so well. The interview will be with both business
owners at the same meeting in order to review and understand their
entrepreneurial and working relationship as an executive team.
 Interview with s senior executive team employee of Manchu Inc. 12 –
This will afford a review of the working environment of the staff in this
company.

Secondary Research
Business and Management Course Companion Textbook by Paul Clark. -
Information will help to gather an analysis and conclusion about the
possible merger of the businesses and further explore the analytical
theories that will be used
 Internet sources – Information will help to understand concepts and
theories better and find online up to date information.
 Other book sources (Mergers: What Can Go Wrong and How to
Prevent It by Patrick Gaughan, Mastering The Merger by David Harding,
Mergers & Acquisitions from A to Z by Andrew J Sherman and more) –
There are many merger focused books which analyse the process and its
outcomes, advantages and disadvantages.
10
Bibliography – Books
11
Appendix – Interview CEOs
12
Appendix – Interview with senior executive team employee.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

After carrying out my primary research (interview with the CEOs and senior
executive team employee) and after I read some information about mergers in
books I will evaluate the advantages and the disadvantages, driving forces and
restricting forces of a merger focusing on the businesses, Manchu Inc. and
Company X.

IV. Advantages of a Merger

Regardless of the difficulty in creating a successful, profitable merger, mergers
have clear advantages. It is important to note that the purpose of this specific
merger is to increase profits, market share and to improve the senior management
team as a whole13.
 Economies of Scale – As the business grows in size, it will begin to
benefit from falling average unit costs. 14 The merged company can spread
its fixed and variable costs over a wider range of units. As the businesses
merge overlapping jobs will be created, therefore the merged business can
employ fewer managers and reduce its salaried personnel. Also, both
businesses were small before and many managers had mixed jobs. As the
businesses merge there will be more professionals and specialists in the
managerial jobs which will increase productivity and efficiency. Lastly,
banks may charge lower rates on loans to a larger merged business than
they charge to a small business

 Larger Amounts of Capital - The shared combined capital of the two

companies will enable it to make more reinvestment in the business.
Reinvestment can be used to further increase business volume, buy new

13
Appendix – Interview CEOs
14
Clark, Paul and Golden, Peter and O’dea , Mark and Weiner, John and Woolrich,
Phil. Business and Management Course Companion. Oxford, Great Britain. Bell and
Bain Ltd, 2009
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

plants, improve quality and the rate of production and increase worker
salaries, enabling the business to attract and retain higher quality
employees.
 A Higher Market Share - This merger will create a higher market
share as both businesses combine their sales. This will create a dominant
environment for the business and improve its reputation and experience,
which can attract new costumers.
 Pricing Power - due to a higher market share and improved service,
Manchu and Company X can now charge more for their products as their
customers are
 Synergy – Synergy is usually associated with the result that occurs
when two companies form a greater company when combined together.
Simply stated, synergy is the phenomenon that 1+1=3. 15 The owners of
both companies clearly stated in the interview that the strongest motive to
merge apart from company growth was the powerful entrepreneurship team
16
that the companies constitute together.
 Revenue-Enhancing Synergy 17– The revenue of the two combined
companies has the potential to be greater than the individual revenue of
each company when added together18, this will enable the companies to
reinvest and increase it’s market share.

 Financial Synergy – following a merger intercompany transactions

can be handled by simple invoicing, not using bank letters of credit involving
opening and negotiating costs, causing straight savings for the merged
company. Financial synergy can also include tax-based synergy to the
extent that some of the trading income might be structured to arise in a
lower tax-base jurisdiction.
 Shared Responsibility – Both companies are self run by an owner
who is also the CEO. A merger will reduce the sole responsibility of each
15
Patrick A. Gaughan Mergers: What Can Go Wrong and How to Prevent It.
16
Appendix – Interview with CEOs
17
Patrick A. Gaughan Mergers: What Can Go Wrong and How to Prevent It.
18
Mergers: what can go wrong and how to prevent it.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

business owner, creating a less pressurized work environment and increase

motivation. Also, both managers working together as a team will result in
the business having higher quality and productivity.
 Higher Customer Satisfaction - Production will be made faster and
cheaper and more time for innovation will be created. Innovation, fast,
efficient and quality production is what the market demands.
 Executive Team Benefits – The two businesses’ workers have been
working together for 13 years before the merger. They know each other
well. The merger of the executive team will release “entrepreneurial
energy”19 and will allow the team to use complementary skills, increasing
motivation production and efficiency.

V. Disadvantages of a Merger
A merger could fail, in fact – 70% do. Also, mergers have unexpected difficulties
as listed below:
 Loss - If the merger doesn’t work as planned and produces losses,
the businesses might not be able to cover the initial costs of the merger and
this will result in lower profits than the aggregate profits before the merger.
This would be demotivating and, if severe, could cause both businesses to
fail.
 Conflicts - There might be conflicts between executive team
members caused by cultural differences and “turf wars”. This may lead to a
demotivating working environment and will make decision making a much
harder and slower process.
 Broader and deeper Span of Control - Due to the merger
management’s span of control may increase and become too broad and
deep slowing down decision-making and creating less control over the
business as a whole. This could cause inefficiency and lost market
opportunities.

19
Appendix – Interview CEOs
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

 Communication Breakdowns - The merged business may suffer

difficulties in communication due to the change in size, employees are
worried about the idea of a new sized merger. 20
 Demotivating and Upset Dismissed Staff - Manchu Inc. and
Company X are small businesses in which all workers know each other and
the managing style is parental. Many jobs will be lost after the merger due
to overlapping and duplicate positions. This may cause a demotivating
working environment and upset dismissed employees who are also close
friends with the existing workforce. These situations are hard to deal with as
they are not business related, yet if the businesses merge, they will not be
able to afford retaining all the current working staff. It is also possible that,
as the businesses merge, many workers who used to have an important
role in the smaller, predecessor company will no longer feel that they have
same degrees of influence over the company. This could also cause
21
demotivation, a lack of interest in the workplace, and inefficiencies.
 Change – The businesses will have to undergo a change in order to
create a successful merger. Employees fear the unknown and lack personal
skills to cope with the new demands. This may cause confusion and be
demotivating.22 The staff of both companies are specialised and have a high
resistance to change. However, the businesses can provide their
employees with training courses which will motivate and help them through
the changes.
 Decreased Quality - Due to increasing production levels, the final
products may be of a lower quality, which is likely to cause problems with
customers and consequently could cause a decrease in future orders. Staff
may become demotivated or will lack the skills to produce up to the new
standards of the merged company. Lower quality products or slower
production may also occur.
 Diseconomies of Scale – As a business grows in size, there is a
point where average unit costs begin to rise and inefficiency may occur.
20
Appendix - Interview with senior executive team employee.
21
Appendix - Interview with senior executive team employee.
22
A ppendix - Interview with senior executive team employee.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

This may happen through communication breakdowns that are likely to

occur due to the challenges of a broader and deeper span of control by
management. Decision-making will also be slower as more people are
involved in the business. Lastly, as motivation of workers falls, productivity
and quality of products may fall too.

Evaluation of Advantages and Disadvantages of the merger

The main advantages are growth which enables economies of scale, which
reduces variable costs and synergy in terms of human resources, production and
management. Another key advantage is the increased market share that allows
the merged business pricing power, which leads to higher profits. The advantages
enable the merged business to fulfil all of the main objectives of both companies
(growth in terms of profit and market share, and consistently improving workforce).
The main disadvantage of a merger is the chance of failure – 70%. This is a big
risk which might lead to a state of loss which is the opposite of the merged
business objective. The merger can be confusing and cause confusion amongst
employees, this is due to the increase in size and the overlapping jobs.
Considering that the workforce in both companies is regarded as ‘collegial’ and the
workers are independent and are treated as “Type Y employees”, it can be said
that if they follow a business plan a merger can be formed successfully.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

VI. Lewin’s Force Field Analysis

Lewin’s Force-Field Analysis is used for analysing the two concepts of ‘Driving
Forces” and “Restricting Forces”. It is used to inform decision making in planning
change businesses.23 Below, there is a list of ‘Driving Forces’ and ‘Restricting
Forces’, each point will be given an ‘importance grade’ out of 10. In the end of the
process the sum will be calculated and a conclusion will be made by reviewing the
weight of each side.
Driving Forces
Driving Forces include the following:
 Growth24 - The most obvious opportunity for merged companies is that of
increased growth. Growth can be looked at in many ways. Higher market
share may be due to increased company overall sales and increased
production due to the specialist skills of the two businesses together. The
growth is likely to increase overall income considering the businesses will
enjoy economies of scale. This will provide a larger ability to reinvest in the
business. The reinvestments can be used in order to buy newer technology
in order to improve quality and the production rate of products. Also, as the
company grows, the salaries of workers can be increased and this will
increase their satisfaction and motivation from the job and the merger. The
expansion of the business also creates job security for workers of the
business. Importance: 8/10
 Development Into New Markets - A merged business can become less
dependent on one market and start developing into new markets. Business
owners might want to expand their business since it will expand their wealth
in the future. A large company will be sold for a lot of money when the
owners want to retire. Importance: 5/10
 Increased Market Share - The customers of both companies are loyal and
give continuous orders due to the ongoing reliability and experience of the
business, which leads to a tight customer-supplier relationship.
Theoretically, the merger will result in higher efficiency and better quality
products due to the synergy and skills contributed. The customers will enjoy
23
http://www.odi.org.uk/rapid/tools/toolkits/KM/Forcefield_analysis.html
24
Mergers & Acquisitions from A to Z by Andrew J Sherman
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

improved service and the merged business’ market share is likely to grow.
Importance: 5/10
 Motivation - Merger of the executive team will release entrepreneurial
energy and allow the merged company to use complementary skills. The
synergy between the two companies will produce the same products but in
a quicker time and of a higher quality. The input of specialist skills, ideas,
connections and resources is likely to cause higher productivity. The
interaction of the two companies will cause a positive effect and is likely to
offer many growth opportunities in the future. The unity of the staff is very
important in the merger, as they are the key that builds the company and
they are the components of a successful merger. Importance: 10/10
 Productivity - Synergy is likely cause higher productivity and also a greater
sales rate25, which will result in a larger market share and a better overall
business performance owing to lower unit costs. Due to higher market
share that theoretically should result in a higher cash flow, the value of the
higher market shares value is likely to increase. Therefore, the value of the
merged company will go up. The merged company will obtain higher profits
which can be reinvested in developing a strong united work force operating
a more successful company. Importance: 5/10
 Quality Products - Quality checks along the production line will, reassure
the objective of the company to have top quality products. Importance: 8/10
 Greater Range of Products - The businesses might be able to be less
dependent on one set of products, and might be able to grow into a new
field such as exporting, etc. Importance: 3/10

Sum: 44/70 = 0.62

Restricting Forces

25
Mergers & Acquisitions from A to Z By Andrew J Sherman
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

Restricting Forces include the following:

 Competition – The larger a company becomes, the more it may be
susceptible to competition from large companies as companies in every
country are allowed to ship goods as much as they wish in the current free
trade environment. Competition has become globalized. Importance: 5/10
 Lack of trust26 - The managers of both businesses were always
parental managers which caused their companies to have a family-like
atmosphere which on one side can be motivating yet on the other can result
in demotivating of employers.
The merger of the two companies is likely to force the owners to make
redundant some of the staff, which could cause a lack of trust to develop
between the owners and the remaining employers. The change might lead
to decreased communication giving the employees fewer opportunities to
speak up. The unity and motivation of workers is always essential for the
merger to be successful. Importance: 7/10
 Diseconomies of Scale - If the merged company chooses not to
dismiss employees, this might result in managerial diseconomies of scale
causing losses due to too many managers carrying out a certain task which
will hurt the company financially. The consequence of this might be that the
merged business will not be able to cover the costs of the overall merger or
just will not achieve its maximum financial performance. Importance: 4/10
 High Turnover Rate - A merger is likely to create many over lapping
jobs which will result in a higher staff turnover rate. Importance : 3/10
 Large Competition – in the current worldwide free trade environment,
all countries are allowed to ship as much goods as they wish. Competition
has become globalized. Since the market is competitive, it is harder to aim
at controlling the market share. Manchu and Company X must be careful
during their merger and stay focused on the business as a whole in terms of
the motivation of workers, zero defects (kai zen) production and efficiency.
Importance: 3/10

26
Appendix – interview with senior executive team employee
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

 Rise in Tax or Interest Rate – A rise in tax can occur due to changes
in the economy during recession. However, the merged company with
outlets in multiple jurisdictions, there is more flexibility to react to the tax
changes, so it might be somewhat an advantage to the companies. 3/10
 Currency Rates – There is a high pressure from the USA and
European countries complaining that the Chinese Yuan is undervalued by
40% and that the Chinese currency rate is kept artificially low by the
Chinese government in order to keep exports cheap and GDP growth rising
in China. If the Yuan exchange rate rises there will be less competition and
less production in the economy in China as Chinese made products will
become more expensive for foreign consumers. This is a threat to the
merger as it can cause an overall state of loss or even a close down. 3/10
Sum: 28/70 = 0.4

Evaluation Lewin’s Force Field Analysis of the merger

The mathematical results of the analysis show that the driving forces are heavier
then the restricting forces.
The driving forces are all valuable and refer to the merger, growth can happen at
an accelerated rate only if the businesses decide to merge and rapidly increasing
market share can only happen if the businesses merge. Unlike the driving forces,
many of the restricting forces of the merger are not dependent of the merger, for
example, the large competition, rise in tax or interest rate and currency rates are
all a threat to the individual businesses, in fact, these can be considered as some
what advantages because if the businesses decide to merge they will be more
resistant to these threats.
From an overall look at this analytical tool it can be observed that the driving
forces outweigh the restricting forces, and that the driving forces are more relevant
to the merger. Lewin’s Force-Field Analysis analytical tool is in favour of the
merger.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

VII. Evaluation
Looking at the advantages and disadvantages and Lewin’s Force-Field Analysis of
the possibility of a merger between the two companies, Manchu Inc. and Company
X Inc., enabled me to spot the areas that will specifically effect the merger and
gave me the means to step closer to making a final decision.
 Communication – The most vital objective of the merger is a planned
out communication system. Since both businesses are individually small
and have a friendly working environment where workers are appreciated
and used to being treated as “Type Y” workers of McGregor's “X and Y
Theory”, the CEOs must assure that the working environment is still
supportive and they must increase communication. This will satisfy the
theoretical success of the merger.
 Training - In order to create a strong workforce and equip workers
with the needed skills and knowledge of the new orientation after the
merger training sessions should be provided. “A recent Walker Information
study of employee loyalty found that two areas that drive loyalty are the
businesses’ focus on employees, and training and development
opportunities. Engaged, motivated employees are more likely stay in their
jobs, and reduction in employee turnover boosts the bottom line 27.”
Motivation and performance will increase as staff are trained to use the
current technology of the companies.
 Structural Integration – The vertical merger will provide synergy to
the merged company and, as discussed above, the advantages of a merger
are a significant benefit to the business. Yet, the vertical integration will also
cause staff reduction. As stated in the interviews with the owners, the staff
are family like and the working environment is spectacularly motivated. My
personal thought is that due to the growth that will come with the merger,
and the general small size of the companies in terms of employees,
reduction and turnover rates will not be as significant as they are expected
to be, as more jobs will be created with the growth. Therefore, theoretically,

27
http://hr.buffalo.edu/index.php?
module=pagemaster&PAGE_user_op=view_page&PAGE_id=389
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

reduction should not be viewed as a big (or maybe the biggest) barrier to
the merger.

VIII. Conclusion and recommendation

‘A merger is part science and part art28’. After reviewing the advantages and
disadvantages of a merger and ‘weighting’ the ‘driving’ and ‘restricting’ forces, I
would recommend the businesses to merge. First, there are more significant
advantages than disadvantages. Second, both businesses are looking for a growth
opportunity. Since both CEOs are keen on the merger and have a ‘gut feeling’ 29 in
favour of it, and since they have been working along side each other for 13 years, I
believe the merger would work, because the management of the businesses are
familiar with each other and the collegial environment will improve due to the
entrepreneurial energy that exists in the executive team.
External source such as competition, tax rates and currency rates are both a
threat and advantage to the business, depends how they are treated. They can be
turned into an advantage if the merged business will build resistance to the
external factors due to its bigger size, this reinforces that the CEOs and the staff
are the root of the success or failure of a merger and the way in which they
confront it.
In order to fully analyze the chances of a successful merger, other aspects of the
business will have to be reviewed such as the profit and loss accounts of each
company, and the costs of merging and more 30. Notwithstanding, I believe that
from the research I have done on mergers and my interview with the CEO’s a
merger should be carried out. I base this decision on the results of the analytical
tools used during the process of writing this essay.

28
Mergers: What Can Go Wrong and How to Prevent It By Patrick A Gaughan
29
Appendix – Interview CEOs
30
The management of Manchu Inc. and Company X inc. stipulated that specific figures
as to private information would not be given and therefore could not be part of the
discussion in this analysis
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

IX. Appendix
Relevant information from interview with the owners of Manchu Inc. and Company
X Inc.
Amit: Could you please give me a brief summery of your company?
Mr. M: The Company Manchu inc. was established in 1983 in Hong Kong as a
garment trading company. Between 1983 and 1987 the company developed
trading by increasing the numbers of importers and customers mainly in China. In
1988 they bought a factory importing company in the Philippines through USA. In
1992 they expended into trading and manufacturing as they bought a new factory
in Mongolia. In 2004 they sold the company in the Philippines and in 2007 all
trading with Mongolia stopped and the factory shut down.
Their main customers are Abercrombie & Fitch, American Eagle Outfitters,
Guess? And White House Black Market.
Mr X: the only information I can provide is that our business is incorporated in
China, and operates in the Garment and Textile sector. We have good
understanding of the Chinese governmental regulations regarding business.
Amit: Tell me about the way in which your companies work together?
Mr. M and Mr X: Manchu’s strengths are in the development of products (trend
concepts, fabric testing, style, sampling). Company X’s strengths are in the
production sector(adaption, prototype samples, fitting, final product). Together they
make up a stronger company. They ‘complete each other’.
Amit: What do you think is the biggest reason to merge?
Mr. M and Mr. X: Since we know each other very well and have experience of
never failing teamwork, we believe that a merger would make everyone happier,
and would improve all aspects of the company. The entrepreneurial energy by the
executive team is phenomenal! This is defiantly the one reason that pushed us to
think of a merger. Apart from that, growth plays a big role too as it is the main
objective of both Manchu Inc. and Company X Inc. Synergy was defiantly the main
reason that brought us to the stage of deciding whether to merge or not.
Apart from that like any other business our main goal is to essentially increase
profits.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

Amit: How will a merger affect your workers?

Mr. M and Mr. X: This is one of our biggest concerns regarding the merger, our
workforce is very unite and the general working conditions are very collegial, we
are concerned about having to make some employees redundant, yet we believe
that a merger will result in growth, therefore new job opportunities. We usually
make recruiting internal. We do speak to employees about the possibility of a
merger in order to understand their views.

Relevant information from interview with X, a member of Manchu’s senior

executive team
Amit: Could you please describe me your working environment?
X: Speaking on the behalf of the senior executive team I feel that it is right to
describe our workplace as ‘collegial’. The manager, Mr. M, Trusts us and gives us
a ‘free hand’ and enables us to work individually on projects.
Amit: Are you afraid of a situation where Manchu and Company X merge?
X: Naturally I do, every employee does. We like our workplace and this is why we
are here. Some of the employees discussed the opportunity to merge with Mr. M
and we were asked for our opinion, we were told that recruiting for new jobs will be
done internally which makes me personally less concerned. We are all nervous
about the fact that some of our fellow workers will be dismissed!
Amit: What makes you nervous about the idea of a merger?
X: The growth in size and the idea that many employees will not be here anymore.
The growth in size scares me as I work better alone, and don’t have the ability to
work in big team.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

X. Work cited
Books:
 Clark, Paul and Golden, Peter and O’dea , Mark and Weiner, John and
Woolrich, Phil. Business and Management Course Companion. Oxford,
Great Britain. Bell and Bain Ltd, 2009
 Cooper, Cary and Gregory, Alan. Advances in Mergers and Acquisitions
Volume 2. Oxford, United Kingdom. Elsevier Science Ltd, 2003
 Frankel, E. S. Michael. Mergers and Acquisitions Deal-Makers : Building a
Winning Team SECOND EDITION. Hoboken, New Jersey. John Wiley &
Sons Inc, 2007.
 Frankel, E. S. Michael. Mergers and Acquisitions Basics : The Key Steps of
Acquisitions, Divestitures and Investments. Hoboken, New Jersey. John
Wiley & Sons Inc, 2005.
 Gaughan, Patrick A. Mergers: What Can Go Wrong and How to Prevent It.
Hoboken, New Jersey. John Wiley & Sons Inc, 2005.
 Harding, David and Rovit, Sam. Mastering The Merger. United States of
America, Harvard Business School Press. Bain & Company Inc, 2004.
 Sherman, Andrew J and Hart, Milledge A. Mergers & Acquisitions from A to
Z. United States of America. AMACOM, 2006.

Websites:
 Adler, Michael and Dumas, Bernard. International Portfolio Choice and
Corporation Finance: A synthesis. American Finance Association Journal,
1987.
http://www.insideindianabusiness.com/contributors.asp?ID=923
 InterLINK Management Consultin. 2005.
http://www.interlinkbusiness.com/artmergers.html
 University of Buffalo, 2007.
Candidate Name: Amit Shemesh Should Manchu Inc. and Company X Inc. merge?
Candidate Number: 003257 – 017

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