Mergers and Acquisitions
Benefits of Mergers and Acquisitions – Is It Time for Your Business?
With unpredictable market behaviour these days, how a business performs is unknown. As such, mergers and acquisition are a common and frequent occurrence.
Mergers and acquisitions help you to get quality staff or additional skills.
When a merger takes place, two separate companies merge, and the resultant company benefits with more manpower.Additionally, if the two separate companies specialise in different industries, staff from the resultant company are equipped with an additional set of skills and knowledge. This gives the individuals as well as the company a more competitive advantage in the market.
Mergers allow you to access funds or valuable assets for new development.
Another advantage of a merger is the combination of both companies’ assets, resulting in a bigger fund pool and more investment opportunities. Additionally, facilities are often less expensive to buy than to build, and a merger allows for more facilities after deducting the cost of building. If you are looking to acquire a business, it would be good to target businesses that are only marginally profitable with a large untapped capacity.
Mergers can help underperforming businesses.
A merger or acquisition can help underperforming businesses, especially businesses that are struggling with growth. This is largely because it is a lot less expensive to buy an existing business rather than to expand internally. Pooling talents from various businesses brings about a stronger and more talented workforce. Mergers also help businesses access a wider customer base and increase the market share as your target business may have other distribution channels and systems that you can take advantage of after the merger.
Mergers can reduce cost, overheads and most importantly, competition.
A merger or acquisition can help your company to reduce cost and overheads, mainly done through shared marketing budgets and with the influx of funds, increased purchasing power. Moreover, when you acquire a new business, you are effectively reducing competition by buying over the competitor. Doing so give you access to new intellectual property, products and services that may be cheaper than developing single-handedly.
Mergers and acquisitions help to accelerate a company’s growth.
As a result of a merger or acquisition, it is now possible to accelerate a company’s organic growth with the added funds, facilities and talent pool gained. With a new business plan that incorporates all these new assets, it is then possible to see an accelerated organic growth from the company that was not possible before the merger or acquisition.
However, it is not a bed of roses.
Mergers and acquisitions may seem to carry plentiful benefits but as with everything, there are disadvantages too. If the business you acquire is not doing as well, then the cost that you intended to save will not materialise. This also happens when key talents leave a company. Remember to explore both the advantages and disadvantages before committing to a merger or acquisition.