In what situation should an industry leader seek to buyout smaller companies?

Expert Solution

There are several explanations why another company should buyout. The most common factor is enterprise's potential growth. A buyout of a business will give the acquiring company an opportunity to increase its market share. Furthermore, company diversification places businesses at an advantage when they choose to combine or acquire another corporation. Restructuring can reduce the impact of a given industry on the competitiveness of the product.

Buyout is cost-effective too. They can reduce the cost of developing business activities which complement the strengths of a company. Apart from that, such restructuring of companies is one way to remove future market rivals.

Businesses may buyout due to talent. Marc Lore, a former leader at Amazon, founded ecommerce company Jet.com. Walmart, racing to contend with the domination of Amazon's market, made the shrewd step of purchasing Jet.com not just for its technology but for its leadership. In this case, Lore. The move has been a success, and Walmart is still recruiting talent.

Buying a company or combining with another company can be a successful investment in achieving the long-term goals of one company. Becoming aware of these problems will help business owners make the right and most reasonable choices before they step into the transaction.

Rahul Sunny answered 1 year ago

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