When is merger and acquisition useful

Merging companies or acquiring another company can bring a number of benefits to those involved with the business. Some advantages relate to how the business can interact with and serve its customers, while others improve efficiencies for employees.

Here are some of the advantages that can come with mergers and acquisitions:. A larger business, or one that has joined forces with another business, will typically have higher needs in terms of material and supplies. A merger or acquisition may result in multiple staff members doing the same job at each individual company. By coming together and eliminating extraneous staff, a business can reduce its overall labor costs while maintaining a stronger, more effective labor force. When two companies come together that operate in the same industry or provide similar goods or services, the newly formed company can enjoy a greater market share, tapping into the resources that both bring to the business deal.

All companies involved in a merger or acquisition pool their financial resources, increasing the overall financial capacity of the new company. New investment opportunities may present or the company may be able to reach a wider audience with a larger marketing budget or more significant inventory capabilities.

A merger or acquisition may expand a company geographically, which would increase its ability to distribute goods or services on a wider scale. While mergers and acquisitions can be beneficial for the businesses involved, certain drawbacks may present that should be carefully considered by all parties.

Some examples of potential disadvantages associated with mergers and acquisitions include:. Merging two companies is a legal business transaction that often requires the involvement of several key professionals. Those involved will typically have to bring in lawyers who specialize in this type of deal, as well as financial professionals who can assist with the assets and other financial details.

The legal costs associated with merging and acquiring can be high. In addition to the need to pay the professionals assisting with the logistics of the merger or acquisition, the business that is acquiring the other would be responsible for paying a sum of money for that business and its assets.

That cost may be viewed as a disadvantage for a business. The time, energy and money that goes into a merger or acquisition could require the businesses involved to forego other potential opportunities.

Mergers and acquisitions. New business. Social media. So You Want My Job. The future of work. The Making Of Today's Office. World Creative Rankings. Promoted from Bridgewest. By Alex Cuc - January 11, Mergers and acquisitions can come with various tax advantages Many governments offer tax cuts or reductions when a merger or acquisition is completed.

New possibilities offered by a new market One of the greatest struggles a business owner can face is related to entering a new market. Share to Twitter. Share to LinkedIn. Share to Facebook. Like what you see? Sign up. From our Network. Different firms have different cultures. No surprise there. But the difference in cultures can be problematic.

You can guard against culture clash by being clear about the culture you want and using all tools at your disposal to ensure you achieve it.

For example, education, the right incentives, and a focus on your employee brand are most helpful when looking at a possible merging of corporate cultures.

Avoid mergers when the features—and benefits—that make one firm valuable are not relevant to the other brand. Rather than add critical assets, capabilities or value, the acquired or merged firm dilutes the brand and competitive advantage. A merger should be the result of carefully researched brand analysis. It should NOT be an ego-driven trophy deal.

Mergers and post-merger integrations are resource-intensive activities that usually involve some of the most senior people in the firm. If they are not prepared for it, they can easily be distracted by other critical, but less urgent activities.

The potential for distraction is greatest—and most profound—after the deal is done and the focus moves to integration. If senior management gets too distracted, and you risk having the merger flounder as well as damaging the underlying business. The acquisition seems very strategic. The result is a confused marketplace. The whole confusing mess could be avoided with a solid, research-based plan to position the merged brand and help current and potential customers understand the rationale and benefits of the merger.

If the marketplace is confused, the strength of your brand will suffer. After all, brand strength is the product of a simple equation:. Understanding this equation can help you avoid the perils of diminished brand strength. An ill-timed merger can quickly diminish the strength of both the acquiring and acquired brands. Brand M, which has considerable visibility in the Midwest, wants to expand into the Southeast.

Diversification of Risk This goes hand-in-hand with economies of scope: By having more revenue streams, it follows that a company can spread risk across those revenue streams, rather than having it focus on just one. Faster Strategy Implementation Mergers and Acquisitions may be the best way to make a long-term strategy to become a mid-term strategy.

Tax Benefits Acquisitions can sometimes bring tax benefits if the target company is in a strategic industry or a country with a favorable tax regime. Conclusion As this list shows, there are numerous benefits to good acquisitions. All Notes. Learn More. About DealRoom Organize, manage and create an accelerated due diligence process.

Tools Pipeline management Diligence management Integration management Divestiture management. What is DealRoom? Diligence Speed up and simplify due diligence process.

Integration Plan for integration alongside diligence. Divestiture Transform how you divest parts of your business.