MERGERS & ACQUISITION

The benefits of Mergers & Acquisitions?

There are many benefits of Mergers & acquisitions, some of which is listed below:

1. Often less expensive to buy than to build
2. If your business is underperforming and not meeting the expected growth it may be less expensive to buy an existing business rather than expanding it internally
3.  Reduction in costs and overheads by sharing expenses, miscellaneous budgets, purchasing costs, etc.

Why opt for Mergers & Acquisitions?

1. When you merge or combine your business activities the overall performance efficiency tends to increase and onboard expenses tend to decline
2. Mergers can provide the acquiring company with an opportunity or prospect to grow their market share without any substantial effort. Instead, the acquirers merely make a purchase of a competitor's business for a certain price, which is usually referred to as a horizontal merger (explained below).
3. When one is thinking of acquiring their suppliers or distributors, the acquirer and can get rid of many costs that would take place. In particular, if an acquirer is buying one of its suppliers it is known as a vertical merger (explained below) where an acquirer saves on the marginal costs that the supplier used to previously charge.

Mergers & Acquisitions - Factors to be Considered

Factors to be considered during the course of Mergers & acquisitions processes are:

1. Form of consideration (Cash or Stocks)
2. Management integration
3. Accounting & Tax treatment
4. Goodwill

There are mainly 3 types of Mergers & acquisitions transactions

1. Horizontal Merger: Merger of 2 or more companies in the same or similar industries to increase the market share and higher revenue. Increased market share helps these types of companies to create control over the prices.
2. Vertical Merger: This type of merger is to expand into different industries such as the manufacturing industry merge with its supply chain company.
3. Conglomerate Merger: Aiming diversification in the business, companies merge from different industries.