Sooner or later, the leaders of successfully developing companies come to the idea of expanding their business. In this sense, mergers and acquisitions are the most effective helpers in achieving such ambitious goals.
Such a strategic move should be correctly designed, in order to be successful. This would be possible only if the entrepreneur knows what do mergers and acquisitions mean.
A merger is a combination of two or more companies, resulting in the formation of one new organization. At the same time, the merged companies cease to exist. The new company takes control and management of all assets and liabilities, after which the latter dissolves.
An acquisition is understood as the union of two or more entities, where the smaller parties cease their autonomous existence as taxpayers and become structural units of a larger participant. The acquisition of a company is often carried out by buying up all or a controlling stake in a business.
When people talk about the M&A processes, sometimes they just mean a change of ownership. For example, a holding group acquires an asset, but the actual restructuring of the company does not ever occur. But, the global practice sees mergers and acquisitions not only as a change of ownership, but also as a large-scale restructuring process of the entire business.
Sometimes, the merger of companies is a more efficient way to develop your own business. This may be a way to penetrate new markets. Obviously, it is more difficult for a foreign company to do this, because the regional niche has long been occupied by local businesses.
Secondly, at some point, you may realize that due to the favorable market situation, your business can grow and develop faster. Still, you do not have enough funds, and obtaining loans would be too problematic. The solution of such a problem is to, at least, attract a partner or join another company.
The perks of merging are different for each type of company. Some businesses do not have a specific license, while others do. At the same time, some companies have the necessary capacities and investments, while others lack them. That’s why combining each other’s strengths may be quite beneficial for both of you.
For a lot of businesses, the acquisition of another firm and its intellectual property is the fastest road to market dominance, or at least a way to block the competitors. Many business spheres truly need experienced professional staff. That’s why, nowadays, intellectual property has become the new currency of business.
Sometimes, mergers and acquisitions can lead to even more problems. When the two businesses have little in common, or their activities contradict each other, the final result may be disastrous. That\s why you should always think well and truly analyse such opportunities and proposals.
The distribution of threats during and after mergers and acquisitions can be stipulated by including various conditions in the contract. They will provide some guarantees and keep you both safe.
Now, we hope you’ll be able to value the pros and cons of such a proposal and make the right timely business choice!
