In business, people often refer to the term M&A. Newspapers, news also often use this term when posting business news of a business. So what is M&A? What types of M&A are available? What are the benefits of M&A for business operations of businesses today?
What is M&A?
What is M&A? M&A stands for Mergers and Acquisitions. This is the term used to refer to the activity of acquiring a control book, owning a business through the acquisition or merger of two or more companies. Mergers or acquisitions may cause the subject to conduct partial or total ownership of the business, which is merged or purchased
People often write M&A, purchase and merge. However, in fact, M and A, mergers and acquisitions are two processes, two completely different concepts.
What is Mergers?
Mergers – mergers occur when two companies conduct consolidation into a new company, with new legal status. The new company will own all the assets, benefits and rights and obligations of both merged companies. The companies agreed and carried out the merger when they realized they could create a new company, bringing greater profits than the old company.
What is acquisitions?
Acquisitions – when a company takes over another company, becomes the new owner of the acquired company. At the same time, the company acquires full ownership of the acquired company legally.
What is the principle of M&A?
Regardless of whether the merger or acquisition, when two companies come together, they create a value greater than the two old companies. This is why when companies encounter difficulties in goods, they all want to find a partner to implement the M&A process. Big companies have the power to buy other companies to expand their capabilities. Target companies will agree to sell for many reasons but most often when they get stuck and don’t have the confidence to solve this problem alone.
Benefits of M&A
As mentioned, when two businesses conduct M&A process, they will create a greater value. Acquisitions and mergers help improve the performance of new businesses by saving costs and improving revenue. Specifically, the benefits of M&A for businesses are:
Cut down excess staff, inefficient employees
After each merger, cut down the staff is the general trend of every business. Employees in the same departments between the two businesses: accounting, marketing, … will be significantly reduced. This reduction not only eliminates poor performers but also saves a lot of costs to pay for this group.
Benefits of M&A: cost savings
When expanding a business, although the demand for stationery, information technology and equipment must increase. Finished, when ordering in large quantities, the unit price of each item is more favorable than before.
On the other hand, when becoming a large customer, businesses can discuss prices with many suppliers before. Thus, businesses can save an additional cost.
Acquisitions and mergers help bring new technologies
A business that is built and operates must have secret decisions and technologies in the field in which it operates. Merging or buying means the new company will be the new owner of the technology.
Owning new technologies helps businesses have more advantages in the process of developing and competing with their rivals.
M&A increases access to new markets
Purchasing a business can help purchasing businesses gain access to new markets. The merger will help businesses expand their market. Since then, whether production and sales activities or calling for investment from other partners are easier and easier.
Acquisitions and mergers are two different processes. Each of these processes has many different forms.
Forms of merger
There are 5 forms of merger:
- Horizontal merger: Two merged companies have a direct competitive relationship (selling the same product line in one market).
- Vertical merger: Merging between a business as a supplier of a part of the product, a business is a product manufacturer (merging an automobile company with a car tire company) .
- Merging market expansion: merging 2 companies selling the same product in 2 different markets.
- Merging and expanding products: merging 2 companies to sell 2 different products in the same market
- Merging as a corporation: merging 2 companies that do not share business activities
The forms of acquisitions all involve a company that acquires another company. However, it can be divided into two types: acquisitions but not stock exchanges and acquisitions as a new company.
Acquisitions or mergers are two big decisions that have a big impact on a company’s development. Therefore, to ensure safety, every company that wants to conduct a merger or acquisition has a thorough exploration, preparation and investigation process. Each merger or acquisition case usually takes between 6 months and 1 year, even more. Each step of mergers and acquisitions is meticulously and carefully by a team of credit experts to bring the greatest benefit to your business.