Why companies want merger and acquisition with other companies? Mergers and acquisitions (M&A) refers to the alliance of companies or assets. M&A can include various transactions, such as acquisitions, tender offers, mergers, consolidations, management acquisitions and purchase of assets. What are the reasons for mergers and acquisitions? Growth Mergers can provide the opportunity to the acquiring company to raise market share without gaining it by doing the work on their own – instead, they purchase the business of their competitor for a price. Generally, these are known as horizontal mergers. Collaboration The common word used in M&A is collaboration, also called synergy, which is the idea that by joining business activities, costs will reduce and performance will improve. Basically, a company will try to merge with another company that has balancing strengths and weaknesses.
Increase the pricing power of supply-chain By buying out one of the distributors or suppliers of another company, a business can eradicate a level of costs. If a company selects to buy out a distributor, it may become able to deliver its products at a cheap
price. If a company buys out the suppliers, it will enable them to save on the margins that were added by the suppliers to its costs previously, this is called as a vertical merger. Diversification/sharpening focus of business These two contradictory goals have been mentioned to define thousands of M&A transactions. A company that opts to merge to diversify may attain another company in an apparently unrelated industry for decreasing the impact of the performance of that specific industry on its profitability. Companies that are looking to sharpen focus mostly merge with companies that have deeper market penetration in a primary area of operations. Gaining a larger market share Many deals of M&A permit the acquirer to eliminate future competition and obtaining a larger market share in the market of its products. A company may want to enlarge into different markets where a similar company is already serving instead of beginning from the base, so the company can simply merge with the other company. This network of marketing or distribution provides both companies with a larger customer base. Hire consultants for mergers and acquisitions If you are planning to merge and acquire your company with another company, it’s best to contact with one of the leading merger and acquisition consulting firms like Group50 for planning the whole process in a proper way. The Group50’s consultants have directed, scheduled and executed the amalgamation of mergers and acquisitions in diverse companies and industries of all sizes including GE, Champion Arrowhead, P&G, Black & Decker, Sunbeam and many more. They have knowledge of strategy execution and how to plan and implement the whole process from start to end. Along with this, they offer unique methodologies and tools for planning and implementing a merger and acquisition in a successful manner. To get detailed information about Group50’s unique approach, you can connect with this renowned mergers and acquisitions consulting firm.