Merger and Acquisitions Are a Part of Business

ACQUISITION OF PEM

SZLN ACQUIRING PEM

ACQUISIITON OF PEM BY SZLN

Merger and Acquisitions are a part of business. It happens when an industry needs to expand vertically or horizontally and it feels that it had a capacity which can be fulfilled by acquiring another company (Jr., 2008). Same is the case here with Lead and Zinc manufacturers. As mentioned in the case, Lead and Zinc are very useful metals and have plethora of uses which make them very attractive and fetch them a good price too. In recent years, acquisitions have taken place across the world in metal manufacturers. Some of them notably include SZLN, PEM, Indonesia Bumi and Tango Co. These companies have invested millions of dollars to gain a large market share by increasing their production as there is left capacity for firms to be filled. Some of the mergers and acquisitions were successful but most of them went astray and the companies themselves were liquidated. To cut a long story short, PEM is looking for an acquirer and SZLN want to purchase it but there are some regulation issues which have cropped up and have raised some issues over regulation.

Mergers always take place when both companies try to find out a way in which shareholder value is increases. As SZLN is looking over to acquire PEM, we see that there is a very strategic importance to the said acquisition (Oesterle, 2009). As Nystar smelters are going to expire, SZLN can now underutilize its smelters which are closed for a long time due to unproductively. As SZLN is financially doing well, PEM on other hand is passing through one of its worst financial crisis as it has made a restructure plan which included cutting in annual production, High Zinc grades which have been increased from the current rates, reduction in staffing and lower exploration expenditure with Broken Hill region but to keep its cash flows growing and its operational needs to be met, it needs a big group to take over it. PEM is also strategically important because it has possession of some of world’s best ores in Australia and South Africa and if operated properly, it can do wonders. The strategic importance of acquisition by SZLN is also important because it has to operate on its full capacity which is still not the case. Secondly, SZLN management knew that there is dearth of mineral resources in the world that is why it is very strategically important to acquire PEM so to have a control over resources which could be beneficial for the firm and ultimately for the shareholders in the