The number of mergers and acquisitions around the world is growing exponentially every year. Modern external conditions force companies to enlarge capital for the sake of its more efficient use and for the sake of further development. Do you want to know whether mergers really create a company’s value? Check the article below.
How Can You Benefit from the Successful Merger Transactions?
The problem of valuation of mergers and acquisitions can be represented by several aspects. It is advisable to start the analysis of this problem by considering the possibility of applying the basic principles of cost-benefit analysis to the processes of financing mergers and acquisitions. The most important principles of cost-benefit analysis involve the correlation of costs and benefits obtained in connection with the implementation of certain actions.
In mergers, the costs are incurred in one way or another for limited periods of time, and the benefits are in the form of participation in the profits of the acquired company, periodically received over an unlimited period of time on the basis of the principle of continuing activities (going concern). The different nature of the costs and benefits of the merger is obvious since the former is of a very definite volume, while the latter is expected.
Merger transactions lead to changes that must be resolved in the process of active communication. And here, success can be ensured if successful branding is included in the game because the brand affects not only external but also internal perception. This factor is the key to successful cultural integration. Brands develop a vision of purpose and motivation of employees to actively participate in the transaction process and to what extent it is seen as a set of opportunities, not threats.
Create Additional Value with Mergers for Transactions
The decision to start a merger is akin to the decision to go on a long journey – it will be difficult and dangerous, but on the other hand, the daredevils will open up never-before-seen prospects and receive one-of-a-kind knowledge. The merger process is never easy, each transaction is unique in its own way, and each needs a special plan of action. We believe that a merger can create additional value, and the transaction will be successful if:
- the object of the transaction is correctly chosen, and its conditions are correctly defined;
- the integration process meets the tasks and needs of a particular situation;
- each stage of integration is carefully planned and implemented.
If a company wants to drastically change its business, it can take over a competitor or form a joint venture or merged corporation with them. Businesses and companies merge for several reasons. Some are merging just to increase the company’s reach, while others are merging to enter new segments or gain market share. However, acquisitions, unlike mergers, are usually not voluntary and involve the active purchase of one company by another.
Moreover, in order to avoid future external problems, many companies are trying to “run” ahead of changes in the external environment and increase the efficiency of their activities, and therefore, they themselves are actively looking for internal reasons for merging. In the latter case, these are, in fact, financial investments and not industrial ones, but the border between them can sometimes persist for a long period.