Introduction:
Mergers and acquisitions (M&A) have a long history, with the modern era beginning in the late 19th and early 20th centuries.
The first wave of M&A activity, from the 1890s to 1904, saw the formation of large corporations through horizontal mergers in the same industry. Since then, M&A has evolved through successive waves, reflecting shifts in economic conditions, regulatory environments, and business strategies.
Companies use M&A for various reasons, such as to grow their business, acquire new technologies, expand their market share, or eliminate competition.
If you're new to the business world or unfamiliar with M&A, this guide will provide an overview of what M&A is, why companies engage in them, and what the process typically looks like.
What are Mergers and Acquisitions?
Mergers and acquisitions are types of corporate restructuring that involve combining two or more companies.
A merger is when two or more companies combine to form a new, larger company.
An acquisition is when one company buys another and takes over its operations.
Why do Companies Engage in Mergers and Acquisitions?
Companies engage in M&A for various reasons -
One common sense is to increase their market share by acquiring a competitor. Other reasons are to expand into new markets or geographies and access new technology, assets, products, or services, fast growth, export, license of such, financial growth, gain capital, and more.
However, M&A can also have drawbacks, such as high costs, cultural clashes, and employee turnover.
The Mergers and Acquisitions M&A process can be complex and lengthy and involves many stages - The first step is identifying potential targets and performing due diligence to evaluate their financial and operational performance; if the target company is deemed suitable, negotiations begin, and the terms of the deal are finalized.
The final stages of the process involve regulatory approvals (if needed) and closing the deal.
Conclusion:
Mergers and acquisitions can be an effective strategy for companies to achieve growth and success; while the process can be complex, understanding the basics of M&A can help companies make informed decisions about their business strategies.