The Hindustan Motors, India's Pioneering automobile company, which put the iconic Ambassador car on the road as a power symbol of the country announced that a French automobile major, the Peugeot SA Group is planning to

Hindustan Motors (HM) was India's pioneering automobile company, which put the iconic Ambassador car on road as a power symbol of the country. But in the era of post-liberalization, the model began losing its dominant position when, in 1984 Maruti Suzuki introduced its low priced 800 hatchback model. Hindustan Motors has for long been struggling and suffering huge losses. An acquisition is when one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired company. The reasons that Peugeot has considered to acquire an existing business of Hindustan Motors especially brand Ambassador are mentioned below: Speed: Acquisition is one of the most time-efficient growth strategies. It offered Peugeot the opportunity to quickly acquire HM resources. In addition, the risks and costs typically associated with new product development may be less. Market power: An acquisition will quickly build market presence for Peugeot and will increase market share while reducing the competitor's stronghold. Where competition is particularly challenging, growth through acquisition can reduce other competitors' capacity and level the playing field. Market synergies are achieved. Brand: Peugeot is buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to Peugeot. When one has an established name in the business community, it's easier to place cold calls and attract new business than with an unproven start-up. It makes sense for Peugeot to buy Ambassador Car brand. New resources and competencies: Businesses may choose acquisition as a route for gaining resources and competencies currently not held. These can have multiple advantages, ranging from immediate increases in revenues to improving long term financial outlook to making it easier to raise capital for other growth strategies. Diversity and expansion can also help a company to weather periods of economic or market slump. Financial gain: Acquiring organizations with low share value or low price earnings ratio can bring short-term gains due to assets stripping. Synergy between the surviving and acquired organizations can mean substantial cost savings as well as more efficient use of resources for soft financial gains. Reduced entry barriers: Acquiring an existing entity can often overcome formerly challenging market entry barriers while reducing risks of adverse competitive reactions. Market entry can otherwise be a costly proposition, involving market research among other upfront expenses, and take years to build a significant client base.