Mergers and acquisitions (M&A) are frequently heard in the business world, but what do they mean, and what are their key features? In this note, we will explore the fascinating world of M&A and how it can impact companies and the economy in general.
A merger occurs when two or more companies come together, and one entity combines its resources, assets, and risks into a single existing company or creates a new one. On the other hand, an acquisition occurs when a company acquires part or all of the assets of another company.
The main reasons for doing an M&A are:
1. Growth and expansion: M&As allow companies to grow and expand rapidly, whether by acquiring new technologies, products, or markets. These strategic transactions allow companies to increase their size and reach significantly.
2. Synergies: One of the main motivations behind an M&A is the search for synergies. This means that companies can combine their resources, knowledge, and capabilities to achieve operational efficiencies, reduce costs, take advantage of economies of scale, and maximize shareholder value.
3. Diversification: M&As also offer the possibility of diversifying a company’s business. By acquiring or merging with another company that operates in a different industry or market, companies can reduce their exposure to specific risks and take advantage of new growth opportunities.
4. Access to talent and experience: M&A transactions can also provide companies with access to specialized talent and expertise. By joining other organizations, knowledge and skills can be shared, driving innovation and competitiveness in the marketplace.
5. Changes in the ownership structure: An M&A usually has a significant impact on the ownership structure of the shareholders of the companies involved, whether it is due to a dissolution of the participation, changes in the shareholding proportion, consolidation of shareholder power, and even changes in shareholder rights. The terms and conditions of the transaction and the legal and contractual agreements involved will influence how the shareholding structure is affected and strategic decision-making after the transaction
At ORBE we have a team of experienced financial and accounting professionals. Orbe has helped numerous businesses successfully navigate significant transactions of M&A. If you’re considering an important business deal, consider reaching out to Orbe Advisors.