Mrc Case Study

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MRC Case Study i. What is the strategic and financial logic of the transaction? There are several reasons which motivate the acquisition of the MRC * Diversification In the case of MRC acquiring ARI the key motive is the diversification; a corporate action to expand MRC’s product offerings. This acquisition allows broadening the MRC’s product portfolio, to expand its own business into new markets and new areas of production. This also helps the company to reduce risk. Via this acquisition MRC deploys its resources to take over an existing business rather than to pursue innovation. * Exploration There is significant uncertainty since MRC cannot know the future. They can form views about whether the potential of the acquisition deal maybe high, but in new unfamiliar area such as rayon market the information is not enough. There are huge question marks over the potential, how the market may evolve, considering the fact that “the rayon industry had enjoyed one of the most spectacular successes in the history of American enterprise” (from the article). But there might be a chance of the market reemerging. The rayon market as every other market goes through cycles and the future trends in clothing may lead to the demand increase in this market. Though “the rayon reached an annual peak in tire manufacturing in 1955,and rayon’s market share of this application began to decline ” its important to consider the fact that “ARI is expected to pick up market share as smaller companies continue to withdraw from the rayon industry” (from the article). This deal might likely be a failure but the deal could be significant in influencing market development and placing the ARI in a privileged position for future strategic moves. * Financial motives For this specific acquisition financial motives play important role. MRC acquisition of
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