Why Mergers And Acquisitions?

 

We must have heard about many companies getting merged with another or one being acquired by another company. Does this happen all of a sudden or is it that they find it beneficial to merge and so they merge? Do they do it with a purpose or does this happen just on a mutual agreement between the two companies? What exactly is the reason or the circumstances under which a company gets merged with the other or gets acquired by another?

None of us might have given attention to such points because we are least interested in all these. So when do we really take a note of it? When we have our shares in one of those companies or when we are being served by the services of one of those companies?

The reason or the need might be anything or nothing at all but to understand the exact meaning or the reason behind a merger and acquisition, a person should probe into the various reasons that might be causing this. Now here are few important reasons other than the economic factor which is generally the core of any merger and acquisition and understanding these would help a person in justifying his acceptance for a merger or an acquisition.

  • A company might decide to merge with another when the former one wants to make a move or an entry into a market that is already been well explored by the other company. In such cases, the former instead of just starting from scratch, it would find it more suitable and beneficial to work in a merger with the latter and this might be one very major reason for a merger.
  • A company might get merged with another or acquire another company when the two feel that they should come together combining the distribution of the products they are leaders at in the market to have a competitive edge over the others. So the two products start reaching the market as a single product line thus making it easy for the two merged companies to find a position in the market.

It’s finally about the survival of the fittest in the market and when this is possible for a company when it works in unison with another company and its services, why not go for a merger or an acquisition? And it is in these lines that companies get together to capture the market and agree to share the profits on a mutual understanding and agreement.