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Mergers and Acquisitions: An Overview

Quite often we come across terms like mergers and acquisitions in different sectors including architecture, engineering, MNCs, construction and more. But many of us are not aware of what these terms mean in depth and what their implications are in the industry. Here is a brief package of information on what merger and acquisitions mean and when are they carried out.

Defining mergers and acquisitions:

Merger and acquisitions are basically the amalgamation and joining of two or more organizations. In isolation, the merger is the grouping of two or more companies to unite as one and acquisition refers to the taking over of one company by another. When it comes to the corporate finance world, merger and acquisition is considered to be one of the most important features. It triggers the growth of a company without introducing a new separate company or product by the same firm.

There are four basic steps involved in the process of M&A.

  1. Pre-announcement, where companies create ideal messages about the move to share with media houses and PR companies.
  2. Strategic execution plan, involving the announcement of the move and gathering of data to share with media, customers, employees, and more.
  3. First 100 days, where clear communication is carried out with employees and customers.
  4. Day 101, which denotes the functioning of two or more newly combined team as one whole entity.

This move takes place by purchasing assets, common shares, exchange of shares for assets, and exchanging shares for shares.

What leads to mergers and acquisitions?

Some of the main reasons behind mergers and acquisitions in majority of the sectors include-

  • Synergy: This term implies that the combining of two or more firms will increase the production and performance and gradually decrease the cost. As the costing is shared by two organizations and the manpower is doubled, the costs go down. This helps in stabilizing a company’s current economic status.
  • Growth: Mergers can provide the right opportunity for a company to develop in the market without taking the entire load on itself. This helps them in increasing their market share and value, thus affecting their revenue and status in the industry.
  • Eradication of competition: Majority of the M&A deals are meant to eliminate the future rivalry and attain a much larger share of the market. The main thing required here is to put up a lucrative plan for the company planned to get acquired so that they get convinced for the process.
  • Expanding products or services: The main reason to go ahead with this process is to diversify the products and services of two companies. This move allows two or more companies to combine their products and services, and ultimately gain a higher place and revenue in the market.
  • Ultimate survival plan: At times, mergers and acquisitions are the only option left with a company to survive in the industry. If they do not choose this option, they might run out of money and gradually land out of the market.

This phenomenon of mergers and acquisitions might appear as a threat to the employees as they might feel insecure with respect to their jobs; however, it has positive implications in the longer run. It results in overall development and job opportunities with time.

So if you are in an industry where your company’s growth seems a bit hazy and you need a stronger hold on the market, it is always a wise idea to opt for merger and acquisition with a stronger and dominating organization. If your company is bearing losses or is surrounded with several controversies like Fintech Ltd, its time you understand the importance of M&A and consider obtaining stronger grip for long-lasting survival in the market.