Right Decisions and Profitable Deals

More than a decade back, a reputed multinational company decided to sell one of its manufacturing plant in order to clean its balance sheet and avoid heavy taxation from the local government authorities. Moreover, it was suffering major losses due to product quality issues and batch recalls from the market. Based on these reasons, the management rolled down the idea of selling off the plant and opening a new production plant, in a different city, that can be more cost-effective and viable in manifold ways. 

One contract manufacturer that was already producing few selected products for this MNC became the potential buyer. From the internal talks, the news for selling the plant was in focus. Subsequently, the contract manufacturer made a high bidding, and the acquisition deal was done.

In fact, for the contract manufacturer, the acquisition turned out attractive because it knew that buying a healthcare production facility will open up new opportunities. It was already into contract manufacturing business, and this latest acquisition was a sort of harbinger for new markets, new deals and ways to improve existing business horizons.

First thing first, after the acquisition deal, the buyer (contract manufacturer) conducted job analysis, reviewed organizational charts and carried out workforce planning. 

Secondly, it took a major decision of terminating 75% of the workforce that was on the company’s payroll. For cost-effective outcomes, it retained 25% of the staff, and based on the requirements, it hired daily wage laborers for its newly acquired plant. 

Thirdly, it ventured into a contract manufacturing agreement with the seller (of the plant) for producing specific products.

Perhaps, the contract manufacturer knew a lot about that MNC and had the inner details of its plant capacity and good rapport with the management. Since, it was sufficiently aware in terms of costs concerns, technical aspects and business operations, there were less chances for any risks and the acquisition became simpler, successful and profitable.

When it comes to acquisitions what matters most is critical thinking and making right decisions on an appropriate basis.

On a side note, later on, the management committee of the MNC realized that it had made a wrong decision by selling the manufacturing facility, which, in fact, had a role model function. Although, it wanted to escape from the burdening taxes and start a remarkable production facility in a new region, but losing a long-standing manufacturing presence in a familiar city was totally irrational.

Once, the agreement is signed and acquisition takes its determined progression, there are rare chances for a deal reversal.

So, the best thing is that before you think of selling your facility you should carry out proper assessments, analyze typical scenarios and possible repercussions, consider actual complexities and hidden opportunities and make right decisions on the right time.

Written by: Mohammed Abdul Jawad

Image source: Pixabay.com