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Mergers and Joint Ventures Essay Sample

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Introduction of TOPIC

The several different types of merger are horizontal, vertical, and conglomeration: Horizontal merger refers to two companies that were once competitors but came together to merge into one large organization. As one large operation, they are serving the same clientele under one entity. Vertical merger is two companies who are a manufacturer and supplier, coming together as one. The main goal in a vertical merger is to increase efficiency in the supply chain to increase profits. Conglomeration happens when two companies that are not in the same category merge into one operation. Usually this happens when companies want to diversify their business and reach out to other categories of assets and portfolios. Joint Venture are two companies joining forces, but as two business entities, such as a collaboration.

“Each company will then take an interest, both operational and financial, in the new company and their share in the profits or losses of the new venture, which will be directly linked to the level of involvement or commitment they put forth from the start” (Scheid, 2010). Joint ventures have a positive or negative effect on the companies involved. It all depends on how the collaboration is perceived. Both companies must make careful consideration and decision making to eliminate any possible negative effect it may have on the company’s business. The difference in a joint venture, the original businesses that are participating do not dissolve. In a merger, the two participating companies are now under one entity, unlike a joint venture. Personal Experiences

One family member worked for Air Tran before South West bought them, now he works for SWA or SWA Tran as they call it. It has been difficult watching him go through it. The In-Law lost some of his tenures, was demoted, and took an extreme pay cut, because of not having the right parent company heritage of SWA. It is interesting to see how the acquired company’s employees are treated. Since he was not an original member of SWA they move him to the night shift, which was from the hours of midnight to noon. One would find this is incomprehensible that a fifty-year-old operate would be forced to return to working through the night.

The original SWA employees petitioned the Air Tran employees also to loose their tenure resetting

all employees, starting the clock at zero. A new company with brand new employees since they were not originally part of the newly formed company. Thankfully the higher -ups came up with a better plan, the employees did take a pay cut but not as much as the original employees wanted. There was much resentment by one group of employees thinking this was not a fair situation. People that had not worked for SWA received the same benefits when they had not worked to receive them as the others did. People can be very selfish, even when their jobs are not on the line. The poor treatments of one company’s employees, by the other parent company, has created a cultural divide. I have been through it three times now. Working under contract, not as an employee, there is a cultural division like social classes. Currently working as a contract employee the treatment received is like legalized slave laborers.

The pay is below job market standards, without benefits of any kind, or overtime pay. Overworked as the administrative assistant supporting a group of approximately 200 engineers. They all have OCD a contractor must work through every break and lunch plus overtime just to keep up. Without previously approved over time of course. I was coached to their way of thinking, which if things are not completed this means the individual lacks the knowledge or skills needed to prioritize the assigned tasks. The consequence resulted in the management revisiting their decision and replace the contractor. The Shell & Texaco joint venture everything changed, even tho our textbook says that each parent company keeps their identity other things change similar to a merger this is at the level of the facilities.

The U.S. was divided into three groups; the names were like Motown groups of the sixties, Motiva, Equiva, and Equilon. The two companies acted as if it was a merger by consolidating the locations and the staff by half. Then they shared formulas for lubricants and gas. A learning experience came about in the business practice of re-branding products. For example, Texaco 10w30 oil is the same as the Shell 10w30. They come from the same storage tanks the only difference is the price the product is sold on the market. When Shell and Texaco ended their joint venture, Shell retained custody of the product formulations and majority of locations on the west coast. Then when they merged with Pennzoil/Quaker State the same thing the oil came from the same tanks, but was sold as 3, different names at three different prices.

With no personal experience with mergers, while doing research on the topic a realization comes to mind that indeed there was a time of employed by a company that was undergoing a joint venture. Allstate insurance purchased Esurance as form of a joint venture. Each company operates individually and has employees that report to separate companies, however Allstate provides assistance to enhance their company and help it compete among other big-name insurance companies. There was no effect to the employees, benefits, pay, and seniority was not affected, however if there had been a merger there would have been widespread effects felt by all. These are some details and situations with joint ventures that are not in the textbooks, but taken by real life experiences from the team members.

Reference
Scheid, J. (2010). Mergers vs. joint Ventures: what’s the difference? Retrieved: on August 8, 2014 from http://www.brighthub.com/office/entrepreneurs/articles/

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