Question

As companies grow and expand, they often prefer to make use of mergers and acquisitions of existing companies instead of growing their businesses via organic growth. In this context they may also desire to reorganize their ownership structure or divest themselves of certain business activities or assets. Please explain why companies may decide to use M&A and the potential benefits of such actions. Then provide an explanation of the alternative types of reorganizations and how these transactions work to accomplish the stated acquisition or divestiture goals.

Answer 1

Company will be using mergers and acquisition in order to help themselves to grow and expand in the business they are operating into, and they will be trying to acquire the other company at a lower price so they feel that they have made purchase at discounted price and they will be trying to to gain more competitive advantage and they will be trying to increase their value through synergies.

Potential benefits which are related to mergers and acquisitions are as follows-

A. Mergers and acquisitions will be helping the company in order to acquire large amount of market share in the industry they are working into.

B. merger and acquisition will also be helping them in order to gain a higher amount of core competitiveness.

C . Mergers and acquisitions value providing a platform to fix the price because they will be having a higher amount of authority over decision of the price because of their organisational structure which has grown larger.

D. mergers and acquisitions will also be helping to synergies and the synergies can be sustainable in the long run.

E .sharing of two business entities corporate culture and sharing of various copyrights and patents will be helping in order to gain through intangible assets in the long run.

there would be an alternate of this type of reorganization and they could be entering through joint venture or they would be trying to do a business restructuring in order to help themselves in order to grow and require larger proportion and the substantial stake in the other company which could provide a better alternative to the merger and acquisition.

various other types of reorganization that will be including joint venture between various companies and business consolidation as well as acquiring of licensing and franchising can also be other types of alternatives to the mergers and acquisitions.

joint venture can also help the company in order to help through sharing of the technical know how and gaining a larger market share as well as franchising and licensing can also help them in order to gain a higher amount of market share by sharing of the technical half so it can be said that these are new alternatives of mergers and acquisitions which will be requiring lesser amount of regulations and procedures at lesser amount of investment of the capital as well.