Mergers and Acquisitions

Two heads are better than just one, as per an old saying. This is especially true when it comes to business mergers and acquisitions (M&A). The combination of a rival can help companies realize synergies, while reducing costs by eliminating redundant roles or systems. However, this kind of collaboration comes at high costs for the M&A process can take from months to years and is often incredibly labor intensive.

A merger and acquisition is a deal that brings together the assets and liabilities from two separate entities to create one entity with greater market reach and more revenue opportunities. Companies typically purchase companies that have similar technologies, product lines or clients. Additionally, acquiring a firm in another country or industry can allow a business to expand into new markets and benefit of lower tax rates.

M&As can be utilized to boost operational efficiency. The advantages of economies of scale can increase access to capital and lower manufacturing costs, while increasing the power of bargaining with vendors. A purchase of technology from a different company will also help save years of research and development investments.

Alongside gaining a foothold on an untapped market, M&A can transform a company into something it was never designed to be. For instance the two giants of brewing Anheuser-Busch InBev and SABMiller merged in 2016 to gain more extensive presence in emerging countries and across continents. The acquisition also allowed the companies to draw on each other’s global infrastructure to reduce costs for supply chain. In most M&A transactions, a company buys the assets and assets of another company by making a payment in cash or stock and assuming any debts. This process is known as the purchase method and the assets of the acquired company are registered on the acquired company’s books at their market (not book) value.

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