Business Acquisition

Business Acquisition

Paper Source is a chain of 165 stationery and gift stores nationwide. The company sells papers, custom invitations and announcements, gifts, greeting cards, gift wraps, papercraft kits, party supplies, personalized stationery, and stamps. It was founded in 1983 and is headquartered in Chicago, Illinois. The company is on the pending acquisition by Elliot Investment Management (EIM) – a company owned by the same owner of Barnes & Noble. EIM will grant the financial resource it needs to emerge from Chapter 11 bankruptcy (El-Bawab,1).

Although Barnes & Noble and Paper Source will operate separately, acquiring Paper Source will yield a competitive advantage. This is because Paper Source can supply the products and services that Barnes & Noble offers.

Paper Source customers can also help broaden Barnes & Noble’s target audience. Moreover, because these two companies offer similar products, they can implement the same marketing and sales strategies that will help lower costs and increase productivity. Recently, CDC announced its new guidelines are eliminating the requirement to wear masks indoors or outdoors for fully vaccinated people. This is good news for Paper Source, meaning the event planning business will resume operations. The demand for party supplies, invitation/greeting cards, gift wraps, gifts, etc., will increase, and Paper Source will have no issues responding to the high demand because it has established card makers and suppliers. In March 2020, Paper Source also acquired Papyrus, which supplied high-quality stationery, greeting cards, and invitations. This will also increase the diversification of its products(Paper Source, 2).

There are diverse reasons why a firm decides to use an acquisition strategy. The acquisition may reshape the firm’s competitive scope, increase market power or increase diversification. However, to facilitate the firm to earn above-average returns, the firm must determine an effective and appropriate acquisition strategy. Of the problems that affect the success of an acquisition, the most critical in the global economy is the inability to conduct due diligence. This is when the acquiring firm evaluates the company to be acquired and is typically executed by large investment banks. The financial and other information will be examined in this process, such as the tax consequences, the cultural differences between the acquiring firm and the target firm, geographical structure, production capabilities, marketing strategies, etc.

Moreover, the due diligence process is to identify potential risks and defects in the investment opportunity to avoid a bad business transaction. We should consider how the company will fit into the acquiring firm’s business plan and long-term strategic goals.

Reference 

Nadine El-Bawab. May 11, 2021. Barnes & Noble owner buys stationery retailer Paper Source out of https://www.cnbc.com/2021/05/11/barnes- noble-owner-buys-stationery-retailer-paper-source-out-of-bankruptcy.html.

Paper Source. March 2, 2020. Paper Source Acquires 30 Papyrus Stores, Expanding Their Presence Amidst U.S. Retail Closures. https://inside.papersource.com/2020/03/02/paper-source-acquires-30- papyrus-stores-expanding-their-presence-amidst-u-s-retail-closures/.

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Using the Internet:
Research acquisitions currently underway and choose one of these acquisitions to discuss.

Based on the firms’ characteristics and experiences and the reasons cited to support the acquisition, do you think it will increase strategic competitiveness for the acquiring firm? Why or why not?
Of the problems that affect the success of an acquisition:
Which one do you believe is the most critical in the global economy? Why?
What should firms do to ensure they do not experience such a problem when using an acquisition strategy?