As companies look to grow, expand, and gain a competitive edge in their respective industries, Mergers and acquisitions (M&A) have become a common phenomenon in today’s economy. M&A deals are complex transactions that involve the transfer of ownership, assets, and liabilities between two or more companies. They are used by businesses to achieve various strategic objectives, including market dominance, increased efficiency, and improved profitability.
In a merger, two or more companies merge their operations and become one entity. On the other hand, in an acquisition, one company acquires another company, and the acquired company becomes a subsidiary of the acquiring company.
Mergers and acquisitions are often pursued for various reasons. This could be for expanding market share, achieving economies of scale, diversifying operations, and gaining access to new technologies or markets.
These transactions can also be used to increase profits by eliminating redundancies, reducing costs, and increasing revenue streams.
Mergers and acquisitions can take many forms, including Horizontal combinations, which bring together competitors in the same industry, Vertical combinations, which extend supply chains, Conglomerates, which involve unrelated businesses owned by a single holding company.
All three transaction types can help companies grow their market shares, customer bases, and product offerings. They can also lead to reduced costs through economies of scale and supply chain integration while giving some diversification benefits. M&A can help a company enter a new market quickly and offer a faster way to develop technology than doing it in-house. Some companies even use M&A as a way to add key employees from the acquired company.
