The Highland Instrument Company has revenues of about $300 million per year. Its

Question

The Highland Instrument Company has revenues of about $300 million per year. Its management is interested in expanding into a new type of product manufactured primarily by Lowland Gauge Inc., a firm with sales of about $200 million annually. Both firms are publicly held with a broad base of stockholders. That is, no single interest holds a large percentage of the shares of either firm. Describe the types of business combination that might be available for the two firms. Include ideas like merger, consolidation, acquisition, friendly, and hostile. 1 low would Highlands management get started? Do the relative sizes of the two firms have any implications for the kinds of combination that are possible or likely?

Explanation / Answer

This has to be a friendly merger because of the floowing two reasons:

1.The size of the two companies are comparable. ( that is takeover is not possible )

2.There is no single large share holder in either of the firm. ( so no one share holder can be influenced for acquisition)

Highland Instruments should approach Lowland gauze with the proposal that their combination will improve the wealth of the shareholders of both the companies for the following reasons:

1.They will be able to achieve economies of scope as the products are related.

2.That Highland will be able to pump in more money in Lowland for higher productions and achievement of economies of scale.

3. By doing actions at 1&2 , they will be able to improve their performance in the market or increase the share in the market.

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