During the time of mergers and acquisitions the overall aim is to create shareholder wealth. However, one must keep in mind the other stakeholders affected by the activity. For example, generally during a time like this cost synergies are created and so the leading organisation focuses on saving money. One example of this would be lowering its employment levels. Despite saving money it can have damaging repercussions such as Trade Unions getting involved and the lay offs negatively affecting the brand image. Other stakeholders becoming affected are the Management/Directors involved in making the decisions. The management of the smaller entity usually is asked to step down, however the idea of a ‘golden parachute’ would cushion the blow some would say.
Currently having a high presence in the news is the deal proposed by News Corps, Rupert Murdoch to purchase the remaining 61% it doesn’t already own of BskyB (BBC News, 2011). Key stakeholders directly affected by this deal are; shareholders, customers, society and the Government. The question could arise as to whether News Corp is undervaluing the shareholders of BskyB by only offering 700p per share, whereas earlier last week BskyB closed at 825p per share (The Guardian, 2011). However, reported by The Guardian (2011), this price can be understood, with News Corp reporting $4.7bn net debt, it if was to raise its offer to say 900p per share, it would be forced to take out borrowings of $20bn. Despite this, it could be argued whether News Corp should enter into this deal if it cannot afford to propose an offer deserved by BskyB shareholders?
Secondly, the Government are playing a major part in this deal. This deal has recently been defended by the U.K. Government with the deal ensuring greater independence for Sky News for at least 10 years, (Jeremy Hunt, Culture Secretary The Telegraph, 2011). This is due to the board members of Sky News to be mostly independent, meaning James Murdoch (Rupert Murdoch’s son) to step down. This deal it severally objected by other members of the media community. This is evident with Guardian, Associated Newspapers, Trinity Mirror and the Telegraph all coming together to exhaust every legal option open to them, (BBC News, 2011). It has been found by the BBC News that the public and as previously mentioned, other media companies, are highly concerned with the politician’s motives for this deal, which instigated Hunts talks with Ofcom and OFT for their help. This suspicion of the public is warranted with the history that Murdoch has within politics and the relationships he has built with past and current Governments.
Finally, this deal will also have an impact upon the customers and the society. Since BBC News (2011) sees that having one man/company controlling the nation’s newspaper and broadcasting interests is an issue for public concern. Rupert Murdoch already owns; The Sun, The Times, The Sunday Times, News of the World, the 39% it currently owns of BskyB and Americas Fox Networks. It may be argued that freedom of speech could be lacking if the views and beliefs of one man/company are portrayed through the use of the media organisations it owns. With this in mind, the deal has been delayed to be investigated by the Competition Commission, talks with Ofcom and the Office of fair trading, leading to a 15 day public consultation, but ultimately if Hunt gives this deal the go ahead, the final decision will be made by BskyB and its shareholders.
There are several reasons for mergers and acquisitions, some include; survival, status, inefficient management, undervalued shares on the stock market and to gain market power. Keeping in mind that market power is one main reason, with the power currently held by News Corp and the influence and relationships Rupert Murdoch has within the political crowd, should this deal go through?
No comments:
Post a Comment