Just What Are Mergers and Acquisitions?

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Mergers and acquisitions (M&A) are two very different things, but the terms are generally used together. This is because there are some significant similarities between the two, and most M&A professionals are trained in both. However, it is very important that you learn more about company mergers and acquisitions, so that you can also make sure that the professionals you enlist to help you execute it will be able to approach the situation with the right attitude, skills and knowledge.

About Mergers

Generally, a merger will happen between two companies that are quite equal in what they do. They are of the same size and are doing equally well on the market. This means that, when the two become one (merge), neither element of the business will overshadow the other. Mergers happen when the two individual companies agree to start working together. They will also usually come up with a new company name, which reflects the fact that two individual entities combined. Mergers are friendly in nature and when the deal is done, both companies end up being stronger.

About Acquisitions

In an acquisition, something completely different happens. Usually, it takes place when a large company comes in and buys out a smaller company. This is known as a takeover, which can be hostile, or a buyout. Although acquisitions can be friendly, particularly if one of the two entities is struggling and would otherwise fail, they can also be hostile. Most of the time, following an acquisition, layoffs and terminations are inevitable. Policies that were in place with the company that got taken over will no longer be relevant. The name of the company tends to be that of the larger one that completed the takeover.

Why Are the Terms Used Together?

The reason why M&As are often used together is because they both deliver a similar end result: two companies become one. Someone who works within the world of M&As understand the differences between the two, however, and they will try to educate their clients on these differences. M&As are often unsuccessful, and this is generally because executives and employees struggle to understand who will play what role in the future of the company.

download1 Just What Are Mergers and Acquisitions?

It is also important to understand that not all hostile takeovers are bad for the smaller company. It is possible that people actually end up in a much better situation, if they are retained. Furthermore, the success of the smaller company is far more likely to continue to grow. This is mainly due to the fact that the larger company has greater budgets, which means marketing and investments become stronger as well.

M&As are often seen as bad and scary things, mainly because they so often lead to redundancies and massive layoffs. However, they can be very positive as well. The economy is set up in such a way that businesses have to make serious changes if they want to remain competitive, and this can be achieved through properly executed mergers OR acquisitions.

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