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Merger and Acquisition Effects on the Operational Performance of Saudi Petrochemical Industries

   

Added on  2020-06-06

16 Pages6599 Words233 Views
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS5.1ConclusionOn the basis of above research project on which it can be said that, there have beenpositive impacts of merger and acquisition on the operational performance of the Saudipetrochemical industries. Tit have impacted on the beneficial growth in terms of profitability andrevenue generation of entity. There have been creation of certain aim and objectives which werebeing analyses for presenting the adequate study on the facts. There are several sections andchapters which were being evaluated and studied to have adequate analysis over the facts.By considering the literature of the studied merger and acquisition process which statesthat, there have been positive growth and revenue generation which could help in makingadequate operational increment. Merger plays main role in having the big amount of capital,large number of workforce as well as wide spread operational level which will be helpful inimproving market value of the firm. Objective 1: To develop understanding and evaluate theories related to merger and acquisition(M&A)As per literature it has been concluded that, petrochemical organizations in Saudi arebeing able to seek satisfactory merger and acquisition which can prove to be helpful in scalingand securing raw material in such a manner that its impact on ultimate prices of oil can bereduced. It helps in increasing overall viability of the products and services that are actuallyoffered by the conglomerated organizations. Since, overall production of oil in Saudi Arabiahave reached to 12.5 million barrels, per day, it has generated the requirement of investing inrefineries within as well as outside the territories (Aggarwal and Urata, 2016). Mergers andacquisition can help in bringing changes in dynamics of raw material, mining, drilling, etc.Policymakers have believed that mergers and acquisition have proven to be quite successful forthe organizations which include a lengthy process of collection of raw material to present it inthe form of finished goods to the customers. However, there have been use of various techniquesand theories which were being discussed in this section have impacted on improving thefinancial performance as well as reducing the risks which are associated with operations of firm.1

Therefore, the objective of report has determined that impacts of Merger and Acquisition overthe business will be effective with reference to generate suitable revenue.The research methodology aspect that has been used by the researcher in order to carryout present investigation. Interpretivism philosophy has been used by the researcher so that realfacts and figures can be taken into consideration ultimately resulting in generation of effectiveresults. Exploratory research design has been used by the researcher so as to come up with newinsights regarding mergers and acquisition. Further, new aspects with respect to mergers andacquisition have determined for analyzation on topic. One of the most important aspect that isrelated to research methodology of research is, data collection and sampling aspects. In thepresent dissertation of mergers and acquisition, data was collected in both primary as well assecondary manner. Primary data has been collected in three formats so as to take the views ofthree sets, that are, CEOs and executives, employees and investors. In order to collect data fromCEOs rigorous interview has been organized containing seven questions in it. It has helped indeveloping insights regarding mergers and acquisition aspects. Further, so as to take the viewsand reviews of employees, a questionnaire containing five questions was also been introduced sothat adequate data regarding the same can be initiated. In the end, data has also been collectedfrom investors, so as to take their say, in the form of questionnaire. Data has been collected from50 CEOs, 20 employees and 20 investors. It has helped in generating newer insight in relationwith mergers and acquisition with respect to petrochemical companies in Saudi Arabia. On the basis of this objective it can be said that, influences of merger and acquisition willbe beneficial to the industries on the basis of cost controlling and organizing the operations.Along with this, there will be reduction in capital expenses such as salaries to the top-levelmanagers and employees which will be ascertained and controlled to have effective businessmanagement. However, researcher have used various theories such as differential efficiencytheory, inefficient management theory, strategic realignment to changing environment etc. arethe theories which has been included and studied to evaluate the changes incurred in industriesafter merger and acquisition.Objective 2: To assess the significance of M&A in the context of business operations andfunction.2

As per literature, it can be said that impacts of this operational changes in the businesshave positive as well as negative impacts with reference to run the business on long term basis.Main aims business in mergers and acquisition is improving the overall financial performanceand reducing risk. It has been stated by the researchers that when companies are combined, theyare able to reduce overall fixed costs by removing duplication of departments or any operations.Use of large number of machineries in the production process will be helpful in reducing numberof Labour force which is ultimately results in lowering the costs of operations in productionprocess.Further, secondary data has been collected by the researcher with the help of books,Journals, online resources, published material, articles, etc. researcher have considered all ethicsrelated aspects. It has also been ensured by the researcher that the data and results are valid a swell as adequately reliable with appropriate reasoning behind the data base. In order to performsecondary research respondents have been chosen form various companies, such as, SaudiArabian Mining Co., national industrialization co., advanced petrochemicals co., Namachemicals co., Sahara petrochemical co., Saudi international petrochemical co. and methanolChemicals co. Along with this, there have been analysis made over Saudi petrochemical organizationswhich has had represented the impacts of Merger and acquisition over their operationalperformance. Sipchem: Young and growing Fast is Saudi joint stock organization established inyear 1999 on 22 December and owned through Saudi and other GCC countries. It has affiliatedto International Diol and International Methanol company as it will manufacture more than onemillion metric ton of methanol and on annual aspect of 75 thousand metric tons butanediol.Similarly, the performance of Saudi Arabian Fertilizer Company was established as joint venturein year 1965 among private sector and Saudi government. The company's aim is to process,produce and manufacture along with market fertilizers inside and outside kingdom. NationalIndustrialization Company has future plan of organization is to market its product globallywhich was undertaken as outcome of Saudi Arabia joining World trade organization. YanbuNational Petrochemical Company (Yansab) on which, the establishment of joint stockcompany in year 2005 where 51% of organization is owned through SABIC, 4% throughSaudi Industrial investment organization, 10% through 17 private organizations and Saudi3

citizens by 35%. Furthermore, the objective of Yansab is engaged in manufacturingpetrochemical products like ethylene glycol, ethylene, low linear density polyethylene andbutene 2 and BTX. Thus, this are the organization which have been addressed to haveadequate ascertainment of the impacts of Merger and Acquisition on the business operations.However, as per analyzing the performances of these organization after Merger andAcquisition on researchers have concluded that, there were positive changes and resultswhich have presented the accurate analysis over the efficiency and revenue generation ofSaudi petrochemical industries.The interview, conducted from CEO of petrochemical industries, concluded that mergeris an important aspect that can be required majorly when entity is planning to expand itself. It isalso helpful in increasing overall scope of the business. It is an effective approach whencompany is losing its brand value and plan to expand itself beyond any geographical limits.Mergers also come handy when the management of company has been poorly framed and is notable to generate adequate profits. However, on the other hand, it can also increase overall cost ofthe business rather than resulting in generation of revenues. CEOs also stated regarding mergershaving positive impact on operational efficiency of the business where technical innovation ofthe company can be enhanced. It can also help in decreasing overall financial risk and ensuringgrowth of the organization (Galeeva and Zinurova, 2015). As per literature review, mergers andacquisitions have been equally important for the petrochemical companies as in the case of othercompanies. Since, it is quite difficult to initiate in these company’s mergers help in gettinginvestment and financial security for the same, that can be adopted for generation of betteramount of profits. It has been recommended by the CEOs of various petrochemical companies,that, it is important to assess and estimate that whether merger and acquisition will be able togenerate adequate amount of profitability out of it or not. Further, liquidity aspect must also be ensured by the team for it better implementation.Thus, the objective of the research has been achieved as the impacts of merger and acquisitionover the organization have positive impacts in raising the gains and efficiency in a profitablemanner.Objective 3: To conclude the influence of M&A on Saudi petrochemical companies andrecommending ways through which business units can improve cost efficiency.4

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