What are the benefits of merging or acquiring companies?
If done correctly, mergers and acquisitions can open a number of doors for your company. Here are a few benefits:
1. Increased growth
Building and growing your business organically can be a long journey, but an M&A could provide a faster route to growth and revenue growth. If done right, by merging or acquiring another company you can combine your resources and market reach to target a whole new arena of potential customers.
2. The combined value and performance of two companies
Many mergers and acquisitions happen with the aim of combining two companies’ value and performance through the possibilities of cost reduction and higher combined revenue. Together the hope is the company will be worth more than as individual companies.
3. Greater market share
By gaining greater market share as a combined force, the new entity will have more power over it’s supply chain and be able to increase their influence over price.
A merger and acquisition can help companies diversify their portfolio and place them in a better position to deal with any possible losses in their industry. By acquiring another company in a different industry, a company will be able to reduce market risk.
5. Tax benefits
Whilst this is not a sole reason for companies to go through an M&A, there are tax benefits if a company acquires another with significant losses. If a company does this, they can use the target company’s losses to lower their tax bill.