Merger & Acquisition

Overview


Mergers

Mergers and Acquisitions not only lead to increased value generation and cost efficiency but they even cause to an increased revenue or reduction in the cost of capital for the organisations. With the rising economy, mergers and acquisitions are gaining more importance now-a-days. They both are aspects of strategic management, corporate finance and management dealing.

However under advisory activities, it does not only refer to benefits of Mergers and Acquisitions, one also needs to highlight the basic difference between the two which is quite blurred today. Mergers and acquisitions (M&A) is a general term that refers to the consolidation of companies or assets.

Merger refers to the condition when the boards of directors for two companies approve the combination of their entities and seek shareholders’ approval. After the merger, unlike acquisitions the acquired company ceases to exist and becomes part of the acquiring company. Starters’ CFO can also help you with employee stock options.

A merger basically is a deal to unite two existing companies into one new company. There are several reasons why companies enter into this agreement for mergers. Most mergers unite two existing companies into one newly named company.

Acquisitions

What is to be understood is that Mergers are not equal to Acquisitions. In an acquisition, the acquiring company obtains the majority stake in the acquired firms, which does not change its name or legal structure.

An acquisition is a form of corporate action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm.



Benefits of M&A


Benefits of Mergers and Acquisitions

  • Diversification of Risk
  • Economies of scale
  • To increase market share and positioning thus giving broader market access
  • Improving company’s performance and accelerate growth


Reasons


Reasons for entering into Mergers and Acquisitions

  • Increased value generation
  • Cost efficiency
  • Increased revenue
  • Reduction in the cost of capital for organisations


FAQs :


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