What Are M&A Transactions?
M&A transactions are the acquisition of one business by another, typically for cash or shares. The objective is to create an enduring competitive advantage in the marketplace. It’s not the best solution for every strategic objective however, companies that www.dataroomspace.info/virtual-data-room-software-for-secure-online-collaboration/ know the benefits it provides and apply it with care will be able to achieve substantial growth.
One reason for M&A is that it enables companies to achieve economies of scale, a phenomenon that says “one plus one is more than two.” Facebook, for example gained access to a new market of customers when it bought WhatsApp and Instagram. It didn’t need to spend a lot of money on the development of these services. It also gained scale and market presence, which gives it more bargaining power suppliers or customers.
A common motive is the desire to create an empire. Managers are motivated to purchase companies that will increase the market share or reduce the competition. This strategy is likely to be successful provided it is implemented with well-defined goals and accurate financial projections.
M&A can also help a company be successful and survive in turbulent markets. For example, many banks joined to shield themselves from the Great Recession of 2008-2011, since credit quality was declining. It’s also used to diversify revenue streams by buying an organization in the same industry or region. For instance, retailers frequently acquire technology or e-commerce firms to gain access to new markets and increase their revenues. One common mistake is to view M&A as just a financial tool without considering the strategic value created.