Benefits of M&A

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Benefits of M&A

When starting up a new venture from scratch, it takes a lot of time and efforts. One has to refine his/her business concept many times then put into execution, like looking for location, renovating the ofice, hiring staffs, designing the product, then marketing plan and many things have to be done. On the opposite, M&A helps one to cut short the process and save a lot of time and efforts.

Besides, typical advantages of M&A such as,

  1. Sales Revenue: An existing income cashflow and customer base will be taken over. Sales track records are available to make a sales projection or analyze the sales activity.
  2. Brand and Resources: Skillful staffs, operational know-how and brand will be taken over. A good M&A deals will generates Synergy Effect to one or both parties, whether it is an inprovement in technology or better brand name to open new market.
  3. Economy of Scale: When two companies in the same industry merged, the combined market share will help the company become more competitive in pricing and marketing, stronger power to negotiate with his suppliers, higher production capacity, and so on.
  4. Diversification: It is widely known that the variety of products or income diversification into several sectors will help reducing the business risk.

As for the seller side, there are various reasons or motives to sell a business. A typical example of SME owner has to sell his business, usually due to his personal issue such as no family member is willing to take his business succession. A friendly M&A is an alternative to provide the business owner a quick way to succession while employees can stay his work rather than a liquidation.

In order to continue business growth, all companies face the reality of market competition. The key to win the competition is relied on how a company allocates its limited managerial resource. Regardless of what size of the company, M&A is an unavoidable issue. Some company may grow through M&A by enlarging its market share, some may want to grow to secure a higher capability to finance. On the other hand, some may want to dispose its non-core sector to achieve a better focus strategy. Different reasons may be.

All enterpreneur’s destination is to exit the business either IPO or sell-off to other, in the worst scenario, is to liquidate and shut down a business. Here comes the M&A will play an important role again, for instance a company will have to acquire other buisness to ensure an organic growth in order to achieve its ultimate goal of IPO, on the other hand a business owner may find M&A is a better option than liquidation as more costs and taxation issues may involve with the rear.