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Advantages And Disadvantages Of Mergers And Acquisitions Pdf

advantages and disadvantages of mergers and acquisitions pdf

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Published: 12.04.2021

So what is the impact of all these mergers? A financial merger or acquisition is pursued, as the name implies, for financial reasons—often to pick up some quick cash or as an investment.

There are many good reasons for growing your business through an acquisition or merger. These include:. Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence. For instance, a business with good management and process systems will be useful to a buyer who wants to improve their own.

The Disadvantages of Merging Companies

Merging two companies can provide the firms with synergies and economies of scale that can lead to greater efficiency and profitability, but it is important to note that mergers can have a downside too. It may be harder for the combined organization to cooperate and communicate, and there's a risk that companies with a too-large market share will eliminate the competition and raise prices for consumers. When two firms merge, it is more than a coming together of two names or brands — it is a real merger of people who bring along a specific corporate culture. If two firms have very different corporate cultures, conflicts can arise. For example, if an innovative, entrepreneurial company with a flat hierarchy were to merge with a highly hierarchical, conservative and traditional organization, the employees in the new organization would be likely to have difficulties working together. When businesses merge, it is often to achieve economies of scale. Larger organizations are typically able to produce goods and services more efficiently and at a lower per-unit cost than smaller businesses because fixed costs are spread out over a larger number of units.

Starting a business has become rather easy, however, growing it is usually harder once a company has reached a certain point. One of the best ways of growing an existing company is through mergers and acquisitions. It is also worth noting that mergers and acquisitions are regulated in countries all over the globe and they come with many advantages. Many governments offer tax cuts or reductions when a merger or acquisition is completed. Among these, Singapore is one of the best Asian countries where a merger or acquisition could take place in. Opening a business in Singapore by merging or acquiring a smaller existing company can attract substantial tax advantages in this country. One of the greatest struggles a business owner can face is related to entering a new market.

This is a type of business alliance are used by companies either to diversify or to grow their businesses. Mergers and acquisitions are generally used synonymously; however, as defined above the two combinations are different in subtle ways. In a merger transaction, a new company is formed by two companies. Post-merger, these separately owned firms become a single entity and are jointly owned. Generally, companies of similar sizes undergo the process of merger.

The Pros and Cons of Mergers and Acquisitions as Part of Your Growth Strategy

By Sumit Sharma. Merger is an agreement or a voluntary fusion whereby two existing entities that are equal in terms of size, scale of operations, customers, etc decides to amalgamate to form into a new entity with an agenda to expand its reach into newer markets, lower operational costs, increase revenues, earn greater control over market share, etc. In simple words, it means an agreement in which two companies settle into an agreement to form a new third company or legal entity. In this, merged companies are usually of equal size and have a similar number of customers. On the other hand, in acquisition acquirer company is more significant as compared to an acquired company. A new legal entity is being created, while this is not the case in an acquisition. It can be a cash or stock merger or both.

A merger involves two firms combining to form one larger company; it can occur due to a takeover or mutual agreement. When looking at mergers it is important to look at the subject on a case by case basis as each merger has different possible benefits and costs — depending on the industry and firms in question. Network Economies. In some industries, firms need to provide a national network. This means there are very significant economies of scale.

The Advantages & Disadvantages of the Acquisition of Another Company in the Same Industry

Seven big benefits of international mergers & acquisitions

Benefits of a Merger or Acquisition

These include:. However, a merger or acquisition can also create its own problems. See what can go wrong with a merger or acquisition? Breadcrumb Home Guides Buy or sell a business Business acquisitions and mergers Benefits of mergers and acquisitions. Mergers and acquisitions Benefits of mergers and acquisitions. These include: Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence.

This provides a means of expansion or it can remove an obstacle to even greater financial success. Before you make that decision, however, you need to understand the pros and cons of acquiring another company that sells similar products or services that you do. First, an acquisition is the act of buying another business, whereas a merger is a process by which two companies become one company, though the ownership interests may differ. In contrast, mergers often involve a chain of command that gives the leadership of the other company some form of authority or control over how decisions are made. One main advantage of buying another business that sells similar product or services is that you can create economies of scale , which refers to the process of increasing production by lowering production costs. When you take on the second business, you can implement the same marketing and sales strategies for the new company, which lowers costs and helps to boost productivity.


A merger is different from an acquisition. Mergers happen when two or more companies combine to form a new entity, whereas an acquisition is the takeover of.


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