Top Advantages of Mergers and Acquisitions (M&A)

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Mergers and acquisitions (M&A) are two words that are commonly used synonymously. But they do have very different meanings. When two separately owned companies become one jointly owned business then it is a merger transaction. However, an acquisition takes place in case one company, typically a bigger organization, takes over a smaller company, and runs the venture with its identity. In the past, Anand Jayapalan had discussed that merging two companies or acquiring a business can bring several benefits to those involved. Here are some of the top benefits of M&A:

Larger market share: One of the biggest reasons why a business merges with another company or acquires another enterprise is to gain a larger market share.  Larger market share helps improve the overall revenue opportunities of a company.

  • Access to industry-leading talent: The more niche a job market, the greater the lengths a company would go to attract and retain the best talents. At times, one of the most effective ways to add the best talent to the team is by acquiring or merging with another company.  This practice becomes especially popular when brand new technologies take markets by storm and there is only a selected group of people who can effectively use the tech.
  • Exploring new markets: Attaining business growth usually is one of the key priorities of business leaders. Entering a new market and connecting with customers that were previously inaccessible are among the fastest ways to grow a business. Entering new markets can be very difficult, especially if a company wants to expand its reach beyond the borders. International regulations, language barriers and cultural differences may hinder the creation of a new entity. To get around these issues, many companies opt to acquire a business already operating in their desired market.
  • Lower costs and increased profit: Over time, M&A can lead to higher profits and lower expenses. A newly established large enterprise or one that has acquired another company typically experiences increased requirements for materials and supplies. When a business has high demands, it also means that it has a high purchasing power. With greater purchasing power, the company is able to negotiate larger-scale orders, leading to improved cost efficiency.
  • Diversification: Having a diverse portfolio is a good business practice. One of the major benefits of acquiring another company is that it allows people to bring other tools, products and services under the umbrella of their organization.
  • Cornering future value: At times, it is not easy to see which companies will thrive and which ones will fail down the line. But at times, the situation is quite straightforward. Some of the biggest deals of all time were, in fact, carried out because it was obvious what the future held. Merging with or acquiring a business with high future potential would be a smart business move.

Earlier, Anand Jayapalan had pointed out that at times acquisition is even carried out to prevent a competitor from doing the same thing. In the highly competitive business landscape of today, large companies often struggle to gain an edge over their rivals. In this situation, acquiring or merging with another company elevates the need of a company to establish itself as the leader within their industry.

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