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Business Analysis: Mergers And Acquisitions

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Merger and acquisition are term used to define the consolidation of companies. When two companies are combined to form a single unit, it is known as merger, whereas acquisition refers to the purchase of company by another one, which means that no new company is formed, but one company has been absorbed into another. Mergers and Acquisitions are important component of strategic management, which comes under corporate finance. The subject deals with buying, selling, dividing and combining various companies. It is a type of restructuring, with the aim to grow rapidly, increase profitability and capture a greater proportion of a market share.

Mergers and acquisitions aim to increase market share, profits and influence in the industry. Mergers …show more content…

Essentially, a business will attempt to merge with another business that has complementary strengths and weaknesses.
Diversification / Sharpening Business Focus: These two conflicting goals have been used to describe thousands of M&A transactions. A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industry's performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of operations.
Growth: Mergers can give the acquiring company an opportunity to grow market share without having to really earn it by doing the work themselves - instead, they buy a competitor's business for a price. Usually, these are called horizontal mergers. For example, a beer company may choose to buy out a smaller competing brewery, enabling the smaller company to make more beer and sell more to its brand-loyal …show more content…

A big part of the problem is that of all the myriad complex decisions that senior executives make before and during a merger, one is mandatory and critical but often given short shrift: the branding of the new corporate entity. That can be a huge blunder. With no solid brand platform to work from, company integration will often be mismanaged, and communications to key constituencies will necessarily suffer. In the worst of situations, the relationship between the two organizations becomes contentious; promised synergies remain elusive; employees become distrustful and disgruntled; and customers grow cynical and

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