Mergers and Acquisitions are strategic tools that can provide growth, expansion of markets, and competitive advantage. They also present challenges and risk. Managers and executives who are dealing with the M&A environment must understand the complexities associated with M&A.
M&As can bring a host of benefits for the acquiring and target companies, including larger economies of scale as well as improved purchasing power, increased distribution capacities, access to new material and non-material resources, special corporate capabilities and risk diversification, geographical expansion and more.
The M&A can require a lot of time effort, money and effort. The businesses involved could have to sacrifice other opportunities. Additionally, a merger or acquisition can create diseconomies of scale for consumers since the combined market share might make them pay higher prices for products and services.
An acquisition can be a friendly or hostile transaction. In a hostile transaction, a company will pay an amount to the owners of the company they want to acquire above what they think the business is worth. The acquiring company then takes over the business, removing any future competition and gaining an increased share of the market.
The company buying the asset can buy the assets of the company that it is targeting leaving the target company with nothing but cash (and maybe some debt, if there is any). In this kind of transaction the acquiring company does not usually retain employees of the acquired company. It may hire a few employees of the company that it acquires and retain its name.