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Mergers and acquisitions, or M&A for short, involves the process of combining two companies into one. The goal of combining two or more businesses is to try and achieve synergy—where the whole (new company) is greater than the sum of its parts (the former two separate entities). Show Mergers occur when two companies join forces. Such transactions typically happen between two businesses that are about the same size and which recognize advantages the other offers in terms of increasing sales, efficiencies, and capabilities. The terms of the merger are often fairly friendly and mutually agreed to and the two companies become equal partners in the new venture. Acquisitions occur when one company buys another company and folds it into its operations. Sometimes the purchase is friendly and sometimes it is hostile, depending on whether the company being acquired believes it is better off as an operating unit of a larger venture. The end result of both processes is the same, but the relationship between the two companies differs based on whether a merger or acquisition occurred. Benefits of combining forcesSome of the benefits of M&A deals have to do with efficiencies and others have to do with capabilities, such as:
Potential drawbacksAlthough mergers and acquisitions are expensive undertakings, there are potential rewards. And there are disadvantages, or reasons not to purchase an acquisition, including:
M&A is a growth strategy corporations often use to quickly increase its size, service area, talent pool, customer base, and resources in one fell swoop. The process is costly, however, so the businesses need to be sure the advantage to be gained is substantial. Topics: Guides Join 446,005 entrepreneurs who already have a head start.Get free online marketing tips and resources delivered directly to your inbox. Email addressSubscribe No charge. Unsubscribe anytime. Thanks for subscribing.You’ll start receiving free tips and resources soon. In the meantime, start building your store with a free 3-day trial of Shopify. Definitionmergers and acquisitions (M&A)
Mergers and acquisitions (M&A) is the area of corporate finances, management and strategy dealing with purchasing and/or joining with other companies. In a merger, two organizations join forces to become a new business, usually with a new name. Because the companies involved are typically of similar size and stature, the term "merger of equals" is sometimes used. In an acquisition, on the other hand, one business buys a second and generally smaller company which may be absorbed into the parent organization or run as a subsidiary. A company under consideration by another organization for a merger or acquisition is sometimes referred to as the target. This was last updated in March 2013 Continue Reading About mergers and acquisitions (M&A)
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