The reason behind a companys merger and acquisitions

This meant I would have to ask the CEO for a follow-up meeting. Instead, acquirers simply buy a competitor's business for a certain price, in what is usually referred to as a horizontal merger.

Acqui-hire[ edit ] The term "acqui-hire" is used to refer to acquisitions where the acquiring company seeks to obtain the target company's talent, rather than their products which are often discontinued as part of the acquisition so the team can focus on projects for their new employer.

A monopoly is when a company controls an overwhelming share of the supply of a service or product in any one industry.

Reasons to acquire a company

Two firms may be able to combine their products or services to gain a competitive edge over others in the marketplace. Sign up for CIO newsletters. Brand decision-makers essentially can choose from four different approaches to dealing with naming issues, each with specific pros and cons: [30] Keep one name and discontinue the other. Market Power A horizontal merger in a small industry will definitely help in increasing the market share. Economy of scope : This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products. However, during the Panic of , the fall in demand led to a steep fall in prices. The meeting went well and the resulting insights that I gained enabled me to develop an approach to due diligence and integration that preserved deal value while mitigating integration risk. The most viable solution to this problem was for firms to merge, through horizontal integration , with other top firms in the market in order to control a large market share and thus successfully set a higher price.

Capability may not just be a particular department; the capability may come from acquiring a unique technology platform rather than trying to build it. In this case, the acquiring company simply hires "acquhires" the staff of the target private company, thereby acquiring its talent if that is its main asset and appeal.

purpose of mergers and acquisitions

Product and Investment Diversification Mergers and acquisitions sometimes happen because business firms want diversification, such as a broader product offering. Synergy Synergy is the motive when the acquiring firm believes that by combining the aggregate parts of the target firm with the aggregate parts of the acquiring firm, the resulting business will generate benefits that exceed the sum of the separate parts of each firm.

Due to high fixed costs, when demand fell, these newly merged companies had an incentive to maintain output and reduce prices. The companies that merged were mass producers of homogeneous goods that could exploit the efficiencies of large volume production.

benefits of merging companies

The Nature of an Acquisition An acquisition tends to be a far less complicated process than a merger. Nowadays, intellectual property has become one of the core competences for companies.

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Mergers & Acquisitions: Meaning, Importance, Examples, Case Studies