Reasons for Mergers and Acquisitions?

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Pankaj Patel
student, United Kingdom

Reasons for Mergers and Acquisitions?

Please help me understand why any company would want to merge with some another company. What are the typical main reasons behind mergers and acquisitions?

  Vishal Acharya
Consultant, India
 

Reasons Behind Mergers & Acquisitions

There are many different reasons for M&A:
1. Increasing market power
2. Removing entry barriers
3. Acquiring competence or know-how.
4. Acquiring new markets
5. Increase access to funds
6. Tax benefits
7. Avail benefits of differential costs and productivity
8. Backward or forward integration
9. Fight competition with third company
These are some of the reasons why company merge with another company.

  jennfergrey
United Kingdom
 

More Reasons Behind Mergers or Acquisitions

I want to add a few more points:
  • Synergy: The idea that by sharing resources or costs, performance might increase and/or costs might decrease.
  • Diversification, selling more products or services in more markets.
  • Buying Power: Increased bargaining power as a combined buyer towards suppliers.
  • Selling Power: Increased bargaining power as a combined supplier towards buyers.
  • Eliminating Competition: Buying a competitor will also make it harder to enter the market for new entrants, because of increased required economies of scale.

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