Mergers and acquisitions
When two companies merge to form a new company it is called Merger. When one company is acquired by another it is called Acquisition. In this age of constant change, both mergers and acquisitions can make organizations to meet the certain difficulties with added strength and convert it into a better phase of growth:
- Technology: Technological changes are so One technology which is the latest trend today becomes outdated tomorrow. For example, Usage of physical money is being reduced now due to the introduction of the online transaction which is the current trend. But digital currency will soon replace physical money and cryptocurrency trading will become an important occupation soon. Read this post to know further details.
Mergers and acquisitions help in tackling the change in technology. The company which is on the verge of loss is given fresh capital and know-how by the merged company or the company which takes over. Hence this will facilitate adaptation to new technology and the weaker company will gradually bloom into normalcy.
- Tax benefits: When governments give tax sops for infusing capital investment in particular sectors, companies which are strong in financial position, do not mind acquiring small loss-making This is beneficial for both the companies. Obviously, the company which takes over enjoys tax rebates. The company which is taken over is saved and can slowly start working with the acquiring company towards eliminating loss and start functioning profitably.
- The scale of operation: When a company works in such a small size in which it cannot be run or managed efficiently, working with a large company will bring in benefits of the large-scale Under such circumstances, the small company is either acquired or merged with a large company.
- Diversification of risk: When a company wants to expand in a different line of products to diversify the risk, it can acquire another company which already into that line.
- Expansion: When companies want to expand their market and size they opt for merger or acquiring another company. This helps to increase their size, market share, and areas of operation.
For reaping above advantages the merger or acquisition has to be done in a planned manner. Any poor planning or wrong strategy will result in failure of the M&A. This will hamper both the companies under the proposal. Hence proper planning must be done that the interests of all the stakeholders are protected.