Mergers and Acquisitions are strategic tools that provide growth, expansion of markets, and competitive advantage. They can also pose challenges and risks. The complexities of M&A must be understood by managers and executives who are navigating the M&A landscape.
M&As can bring a host of benefits for both the acquiring and target companies, including larger economies of scale enhanced purchasing power, enhanced distribution capacities and access to new materials and non-material resources, special corporate capabilities, risk diversification, geographic expansion, and many more.
The M&A process may take considerable time, energy and even money. The companies involved may need to sacrifice other opportunities. Furthermore, a merger or acquisition can result in a loss of scale for consumers, since the combined market share could result in them having to pay more for products and services.
A hostile transaction can be an acquisition. In hostile transactions the company pays an amount to the owners of a target company over what they believe the business is worth. The acquiring company then takes over the business, removing any future competition and gaining an increased share of the market.
The company that acquires the assets can purchase the assets of the company that it is targeting and leave the target with nothing other than cash (and perhaps some debt, if any). In this type transaction the company that acquires it does not usually retain employees from the business it acquired. It could, however, hire some of its employees and preserve the name of the acquired company.
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