Mergers and Acquisitions
Mergers and acquisitions is a strategy that enables firms to grow rapidly and to absorb competitors. In each industry and market there are strong and weak competitors. Those firms that are in a strong economic position can fill in gaps in their organizations by merging with or acquiring competitors. In some instances the merger is a regional strategy, if a firm wants to expand outside their present footprint. Purchasing a firm that is already operating in the target area is a way to rapidly grow without incurring many of the costs and delays of expansion.
Another attractive reason for mergers and acquisitions is to gain technical expertise or new products. Undercapitalized firms that have developed innovative products or have robust human resources in specific areas are especially vulnerable to being taken over. Some of the attractive items that other firms are looking for are prime locations for retail outlets, engineering departments, valuable patents, and established customers.
Mergers and acquisitions also carry risks for the purchasing entity, the most critical being incorporating the new units into the existing organization. This can often be an expensive process because policies and procedures often need to be combined and redundancies eliminated. Maintaining employee morale and productivity can often be a challenge during this period.
Example of mergers and acquisitions.
Another attractive reason for mergers and acquisitions is to gain technical expertise or new products. Undercapitalized firms that have developed innovative products or have robust human resources in specific areas are especially vulnerable to being taken over. Some of the attractive items that other firms are looking for are prime locations for retail outlets, engineering departments, valuable patents, and established customers.
Mergers and acquisitions also carry risks for the purchasing entity, the most critical being incorporating the new units into the existing organization. This can often be an expensive process because policies and procedures often need to be combined and redundancies eliminated. Maintaining employee morale and productivity can often be a challenge during this period.
Example of mergers and acquisitions.