Motives behind Sainsbury's acquisition of Home Retail Group

395 words (2 pages) Business Question

17th Jun 2020 Business Question Reference this

Tags: SupermarketRetailQuestionsSainsburys

Disclaimer: This work has been submitted by a student. This is not an example of the work produced by our Essay Writing Service. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of BusinessTeacher.org.

Question

what are the motives behind the Sainsbury's and Home retail group merger deal?

Answer

Johnson, Whittington & Scholes (2011) divided motives for mergers and acquisitions into three main groups. These are strategic motives, financial motives and managerial motives. The commentary here is on the motives behind Sainsbury’s’ acquisition of Home Retail Group (HRG), and two motive groups provide explanations as to the rationale behind the acquisition of HRG namely, strategic and financial motives. • Strategic motives – focused on improving and developing the business; closely linked to competitive advantage. A Sainsbury's spokesperson said: "The combination of both businesses will create a multi-product, multi-channel proposition with fast delivery networks, benefiting customers by accelerating our strategy to give them what they want, where and when they want it. We look forward to the successful completion of the deal," (BBC News 2016). This form of horizontal integration indicates that the motive is to increase both the scale and the market share of the combined firm. Access to wider distribution and improved business capabilities are the other strategic motives behind the takeover as the firm will improve its delivery networks – Argos (which is part of HRG) is known for its excellent online delivery network. All in all, this will improve Sainsbury’s Argos’ competitive position. Moreover, Sainsbury’s wants to reinvent itself as a digital retail leader. • Financial motives – focused on making best use of financial resources for shareholders; concerned with improved financial performance. In its reasoning for acquiring HRG, Sainsbury’s said it expects to achieve Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) synergies of “not less than £120 million in the third year after completion.” Furthermore, cost synergies provide financial motive. It should be noted that all takeovers and mergers have financial motives of one kind or another. In the case of Sainsbury’s this holds true but it does not appear to be the most important driver of the deal.

References

BBC News (2016) Sainsbury's takeover of Home Retail to be probed. Available from: http://www.bbc.co.uk/news/business-36401857 Johnson, G., Whittington, R., & Scholes, K. (2011) Exploring Strategy. NJ: Prentice Hall.

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this question and no longer wish to have your work published on the UKDiss.com website then please: