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Bran-New International Co., Ltd - South Korea / Best Compact Baby Stroller 2021 - Keenz Air Plus Best International Recruitment Specialist 2021 - UAE Mergers and Acquisitions Firm of the Year 2021 – Taiwan Dispute Resolution Law Firm of the Year Litigation Law Firm of the Year – India Best Architectural Design & Construction Management Company & Best Contemporary Private Home Design Project: Shell House - Japan Most Trusted Inspection Company of 2019 & 2020
Purposes of Merger and Acquisition: Industrial Transformation and Upgrading
Growth of an enterprise is not limited to expansion of production capacity or sales. Transformation and upgrading of an enterprise, such as horizontal merger through strategic alliance or vertical merger, or cutting businesses suffering losses in the enterprise and acquiring departments of other enterprises, is the necessary path for enterprise growth and industrial upgrading or transformation. The commercial purposes which an enterprise expects to achieve through merger and acquisition are referred to as purposes of merger and acquisition. Purposes of merger and acquisition may include the following: in terms of horizontal merger, enterprises should remove their weaknesses in the industry they belong to, increase market share, reduce costs and improve efficiency, so as to form economies of scale and enhance competitiveness; enterprises can consolidate supply sources and develop markets through vertical merger; in split-up, enterprises can solve the conflict and contradiction between the OEM and brand companies or achieve the professional division of labor. In a nutshell, merger and acquisition is a process of “you throwing and me picking, and each taking what it needs”. Through this process of merger and acquisition, different types and levels of channel, market expansion, brand acquisition, key technology or key customers can be obtained. In the past, the motivation of business operators to actively participate in merger and acquisition was not high. However, as time goes by, the concepts of economies of scale, specialization and corporate synergy have emerged, and the mentality of business operators has changed. With the global competition heating up and Mainland China’s rising strongly, it is a trend to expand the business territory by merger and acquisition. Moreover, unsolicited (hostile) takeover has become more popular in recent years. Even if an enterprise wants to stick to its own business territory, it also needs to face the threat of unsolicited (hostile) takeover by domestic and foreign companies. Therefore, enterprises cannot escape passively, but must face actively the oncoming of merger and acquisition. Common defenses against unsolicited (hostile) takeover, such as bringing in a white knight or merging with another enterprise, are also merger and acquisition in their nature, but they are more about defense than growth. In addition, under intense competition, it is common for enterprises to face financial difficulties due to product, technology, market or sales obstacles. In order to survive, the management team has responsibility to seek the best interests for
all shareholders, while seeking to merge into or be acquired by another enterprise is a common measure and decision. In this case, the strategic needs are different, and the purpose of the merger and acquisition is to extend the life of the enterprise rather than to pursue its growth.
Overview of Merger and Acquisition
Merger and acquisition is only a means, and a process of achieving specific business purposes of an enterprise, rather than the result. When proceeding with merger and acquisition, the enterprise should first understand its own needs and set a clear purpose for the merger and acquisition strategy. In addition, in the process of merger and acquisition, it is necessary to constantly review the originally set purpose of the merger and acquisition, so as to avoid getting lost in the lengthy process of due diligence, evaluation and negotiation and deviating from the purpose of the merger and acquisition. Enterprises that are good at growing by merger and acquisition can consolidate the foundation by self-growth on one hand, and expand by merger and acquisition on the other hand. At the same time, they can suppress the development of competitors, make good use of the two feet for enterprise growth, and achieve twice the result with half the effort. Of course, not every merger and acquisition case can be called a successful one, but enterprises that are good at growing by merger and acquisition usually face up to the challenges of competition positively and have a better chance of surviving in the global competition than enterprises that stay conservative or avoid merger and acquisition passively. Finally, merger and acquisition is a process, the end of merger and acquisition period was followed by the integration period. The key for the success of the merger and acquisition is to successfully and painlessly combine an enterprise which was not cultivated by self-growth and has different enterprise culture completely during the golden run-in period after the merger and acquisition and then incorporate it into the existing enterprise. The integration after merger and acquisition actually begins before the merger and acquisition, and the success or failure of the final integration is almost determined when setting the goal of the merger and acquisition and choosing the object of the merger and acquisition. Therefore, the importance of planning, decision-making and management at the early stage of merger and acquisition should not be neglected. The greatest value that professional consultants of merger and acquisition can bring to merger and acquisition case mostly lies at the early stage of merge and acquisition.
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