Mergers & Acquisitions

The term mergers and acquisitions (M&A) refer broadly to the process of one company combining with one another.

In an acquisition, one company purchases the other outright. The acquired firm does not change its legal name or structure but is now owned by the parent company.

A merger is the combination of two firms, which subsequently form a new legal entity under the banner of one corporate name.

Mergers and acquisitions(M&A) are transactions in which the ownership of companies, other business organizations or their operating units are transferred or combined. As an aspect of strategic management, M&A can allow enterprises to grow, shrink, and change the nature of their business or competitive position.

Now we need to first discover the reasons for mergers and acquisitions

Some of the reasons are such as:

• Financial synergy for lower cost of capital
• Improving company’s performance and accelerate growth
• Economies of scale
• Diversification for higher growth products or markets
• To increase market share and positioning giving broader market access
• Strategic realignment and technological change
• Tax considerations
• Under valued target
• Diversification of risk

So, in basic concepts we need to understand how mergers and acquisitions takes place.

• Either by purchasing assets
• Either by purchasing common shares
• By exchange of shares for assets
• By exchanging shares for shares