Exploring the Strategic Benefits of Mergers and Acquisitions

FREMONT, CA: Few companies reach the top without engaging in at least a few M&A deals. The world's most successful companies have teams dedicated to identifying attractive acquisition opportunities. When executed properly, an active mergers and acquisitions strategy can be a highly profitable process for any company.

Key benefits of mergers and acquisitions explained in detail:

Economies of scale: The foundation of all merger and acquisition activity is the promise of economies of scale. While buyers should always avoid the temptation to engage in 'empire building,' larger companies typically have benefits that smaller ones do not.  

Opportunistic value generation: Some of the best acquisitions occur when a company isn't actively seeking an acquisition. The purchase price for these purchases is less than the fair market worth of the target company's net assets. Often, these companies are in financial trouble, but a deal can be reached to keep the company afloat while the buyer gains immediate value as a direct result of the sale.

Increased competition: As a company grows in size, it becomes more competitive. Again, this is one of the key advantages of economies of scale: being larger allows companies to compete for more. For example, dozens of new companies are already entering the plant-based meat market, offering various vegetable-based 'meats.'

Quicker strategy implementation:  Mergers and acquisitions may be the most effective approach to convert a long-term strategy into a mid-term strategy. This also applies to new product development and R&D, as organic strategies can rarely match M&A's speed.

Risk diversification: This correlates with economies of scope: Having many revenue streams allows a company to disperse risk among them rather than focusing on just one. According to observers, younger audiences are shifting away from Facebook and towards other social media platforms. When one revenue stream declines, another may maintain or even increase, diversifying the acquiring company's risk.

Access to talent: If someone asks anyone in the recruitment industry where the largest skill shortages are right now, they will almost always say something along the variant of "people who can code." First and foremost, this is due to the high need for coders during the so-called Fourth Industrial Revolution.