Why Companies Opt For Mergers And Acquisition

We often hear of two big names merging and coming together as one. While such mergers may not cause too much of a disruption of normal life, but they are always a highly strategic move with plenty of business calculations. A Merger and Acquisition (M&A) most often proves to be beneficial for both the parties, who can do better hand in hand rather than opposite each other.

Let us first know some basics of an M&A

What are a Merger and Acquisition?

Simply put, M&A is when two companies come together to form one unanimous company. The key factor motive behind such a move is always an economic one. An M&A primarily is to create market share value over and above the existing shareholders of both the companies.

When a company is aware that its value will increase if it adds to the assets of another it might propose to take over. While the other company may be aware that it cannot survive the market on its own and allows to be taken over.

Let us now consider some of the main reasons for an M&A

  • Increased services: After an M&A the company is in a better position and more capable of undertaking more responsibilities. The key features of the new company add value to the existing capabilities of the company.
  • Reducing competition: By taking over a competitor who may be a competitor, no matter how small or big, a company reduces the scope of competition.
  • Increased market value: An M&A results in not just the merger of companies but also their market share value. Along with that, a merger also results in increased market share among shareholders which is over and above the existing shareholders of the company.
  • Diversifying service: When two companies combine, it gives them an upper hand in the market competition. They may be able to complement the services of each other and able to provide more selection in terms of products and services.
  • Replacement of leaders: Yet another reason for a company to consider a merger especially in a private company is when the current owner does not have a fitting replacement as the future leader of the company.
  • Cost cutting: It is a known fact that a merger could result in laying off many employees. But this results in tremendous savings for companies. A merger results in saving salaries of many employees including the top notch.
  • Staying afloat: When a company is aware that they may be good but need the support of another to survive, a merger is always a good option.

Getting assistance from companies like Fintech Ltd. can prove helpful when navigating the labyrinth of mergers and acquisitions.