Why Merge or Acquire?

Whether to merge with another company to grow bigger, acquire another company for their assets, or sell to get out of the business, there are four main reasons we have seen as to why businesses would like to go down this path of mergers and acquisitions.

            The first main reason why a business looks to acquire is to boost performance efficiency. Combining business activities boosts production while costs tend to decrease, this is because both businesses are using each other’s strengths.

            Next is growth, acquiring or merging with another company is an opportunity to expand market reach quickly without doing much hard work in the process. This brings the term, “You have to spend money to make money,” to light in a very realistic way. Business owners and entrepreneurs alike use mergers and acquisitions strategically in their fields to gain a lead over the competition or for financial gain.

            Third is to boost the supply chain. For large corporations and businesses that buy from local distributors and suppliers, acquiring the suppliers themselves means that they can eliminate an entire level of costs and save on margins taxed by the previous supplier. Buying a distributor means the company can ship products at a lower cost as well.

            Lastly, eliminating competition is a popular reason that businesses want to merge or acquire. Eliminating future competition creates a gain in the market for the acquiring company and can lead to positive additions in the form of employees or other assets.

            These are not all the reasons that corporations and businesses would want to acquire, but they are the ones that stand out to us. Have any others that stand out to you, or have more questions about mergers and acquisitions? Let us at The Center know at (618) 997-3436.