Mergers and Acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. The distinction between a “merger” and an “acquisition” has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all situations.
M&A have a profitable side that can create potentially enormous profits for a company, and expose the business to a myriad of financial resources. For a company that is on the verge of bankruptcy or in some kind of financial trouble, merging with another company may become the only way to not only save the company, but also to free up some much needed cash and credit.
Acquiring a business for the purpose of creating a conglomerate or a quick sale and turning a profit is part of the allure of M&A. The organization thoroughly investigates the business dealings between the parties involved in either the merger or business acquisition. The proper documentation must be presented as well as the reason for the merger or business purchase. Stakeholders’ concerns must be addressed because once the deal finalized, all company debt and stakeholders’ issues are inherited by the new ownership. Employees of the company being merged must be fairly compensated, or offered a position within the blended company, re-trained, or referred to another company.
On the other hand, there are certain challenges faced by M&A operators. For instance, in certain countries, regulations prohibit the purchase of land or any type of property or business, making it impossible for M&A to develop.
Nowadays there has also been a surge in the merging of businesses with one another, and in some cases, hostile take-overs.
Finally, M&A trends are cyclical, and with banks and other lending institutions refusing to extend credit or make loans, the merging of businesses can slow down dramatically