Question

9. William Inc. is the manufacturer of cosmetics, soaps and shower gels. It also markets its products using its own highly successful sales and marketing department. It is seen as an employer of choice and as such has a talented and loyal workforce with a history of developing new and exciting products which have sold well. It is now considering extending its range, however it has currently a build-up of unfulfilled orders due to lack of capacity. GSL is a well-known herbal remedy for skin problems.

GSL Co was founded by 3 brothers in the 1950s and until the death of the remaining brother in 2007 has performed well. However, the new Chairman has limited experience and the company has not performed well over recent years. GSL has a dedicated team of herbalists who have developed products, which would find a ready market – however, there is insufficient funds and expertise to correctly market these products and market share is low.

William’s products and GSL’s products are made using similar production technologies and their financial and administrative systems are similar and it is hoped savings can be made here.

Required: Identify any potential synergy gains that would emerge from a merger of William and GSL.

Answer 1

The merger of William Inc. and GSL will be beneficial and both the companies will gain out of it. Both the companies have certain problems which can be solved easily if they are working together as one. GSL needs a good marketing team and expertise to market their product which William Inc. already has. William Inc. on the other hand has plans of extending its range. So, the merger will help William Inc. by making them extend their range through the herbal products of GSL. The financial requirements can be met by taking loan or raising money from the market. Since the financial and administrative system is common, so there will be some savings which will help in survival of the two companies. Thus, a merger will be beneficial to both the companies.