Acquisition is the purchase of one company by another company or purchase of a smaller company by a larger one. In 2008, Wells Fargo and company acquired Wachovia Corporation at a cost of $15.1 billion to establish the most extensive distribution system in North America for the provision of financial services. Wells Fargo provides banking, insurance, investments, consumer and commercial finance and mortgages. JP Morgan chase acquired Washington Mutual which was under receivership in 2008 for $1.836 billion from the Federal Deposit Insurance Corporation. The Washington Mutual had collapsed due to a mortgage crisis that resulted from customer defaults and was the largest bank failure in American history (Vishwanath, 2008).

The acquiring banks have difficulties in trying to make these mergers work through cutting costs  associated with restructuring such as rebranding to change the identity of the acquired company, licensing and also gaining market share, customers and dominance in the target company locations. The banks are also faced with the obligation of paying all the liabilities owed by the acquired company, increasing efficiency of business operations and laying off excess employees. The acquisitions may also result in high labor turnover due to changes in employment terms and conditions by the acquiring company that results in management level workers lacking motivation and seeking employment opportunities elsewhere. Diseconomies of scale may be experienced in the long run due to high unit costs as a consequence of the Corporation becoming too large (Vishwanath, 2008).

The management level may also need to be reassessed and restructured due to the arising complexities associated with the running the acquired businesses. The acquiring companies will also have to deal with ensuring that the prices of stock of the acquired banks in the market are performing well and are stable in order to remain in a strong capital position and reduce the costs incurred to generate more growth for the company. The acquiring banks have to deal with the new tax margins that have to be paid to the Federal government and the compliance laws of banking practices.  The companies also have to figure out a strategy of increasing the shareholder value of the acquired company, as well as its own through competitive business strategies. Finally, a clash of cultures in both the acquiring and acquired organizations may result in productivity decrease and new management as a result of changes in the workplace policies.

Acquisition is an effective strategy that helps companies to increase revenues, cut costs and increase efficiency but requires to be carried out systematically to avoid unnecessary losses and costs. Through acquisition, investors can be guaranteed of a good return on their investments and a sound company policy that maximizes shareholders value. It is therefore necessary for companies engaging in acquisitions to forecasts the risks involved and the gains anticipated in the acquisition of other companies. The success of acquisitions is based on the combination value that business owners and managers place in acquisitions.

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