Mergers and Acquisitions are strategic tools that provide growth, market expansion, and competitive advantages. They can also pose risks and challenges. Managers and executives who are dealing with the M&A environment must be aware of the intricacies involved with M&A.
M&As can bring a number of advantages to the target and the acquiring companies. These include greater economies of scale as well as improved distribution and purchasing power as well as accessing new materials and non-material resources, corporate capabilities as well as risk diversion, geographic expansion, and more.
The M&A will require a significant amount of time and effort, as well as a lot of money. The businesses involved could have to give up on other opportunities. Furthermore the acquisition or merger could lead to diseconomies of size for consumers since the combined market share might result in them having to pay more for goods and services.
A hostile transaction could be an acquisition. In hostile transactions, a company will pay an amount to the owners of the target company above what they think the business is worth. The acquiring firm then takes over the business it is buying, eliminating future competition and obtaining a larger market share.
The acquiring company can also purchase the assets of the target company, leaving the target with nothing other than cash (and perhaps some debt, if any). In this kind of deal the acquiring company will not usually retain the employees from the business it acquired. It may, however, employ some of its employees and preserve the name of the acquired business.
