The business world is very dynamic. Developments take place on a daily basis hence firms need to change their structure in order to operate efficiently in the market. There are many changes which happen affecting the way firms compete in the market. Formation of M&A has become a very useful survival technique by firms which are in highly competitive markets. This enables the firms to acquire a bigger market share and operate at a cost effective level.
It has been found that mergers and acquisition often lead to increased value generation. When the parent companies are merged together, the number of shareholders increase which increase the available capital by a great margin. The firms are therefore provided with enough capital to venture into new business that will bring about more returns and growth.
A firm may use the acquisition decision to help sell more of its products to a market dominated by another company. This is where the known form is used to sell the products on behalf of the inferior firm. Buyers will buy more products hence the two entities will enjoy greater profits in the end. The cost of marketing is reduced in this case.
The economies of scale enjoyed by the joint firms are very low. When companies come together to produce or offer a service, the cost involved in generating it is reduced per unit of output. The technology applied is same to all products hence the production is done on great levels. More production brings about more sales and revenues while the cost is minimized.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Firms which agree to join together in the production process benefit from advanced technology. In an event where one company was using a more advanced system, the entire technology is adopted in production. This promotes efficiency with the use of raw materials hence high returns are enjoyed.
The market share taken up by a joint company is greater than that owned by individual firms. This is a reason why managers opt to merge their firms in markets dominated by many competitors. This will enable their products to sell more at maintain prices which will give them better profits. When companies come together, they are able to carry out market research on the nature of products which consumers want hence enough supply is done.
Employees have at times become beneficiaries of merging business entities. This happens when their salaries are reviewed upward. They get to earn better salaries at the same job group level. In some cases, promotions have been done and the junior staffs are promoted to higher ranks. This affects the performance of the company positively.
It has been found that mergers and acquisition often lead to increased value generation. When the parent companies are merged together, the number of shareholders increase which increase the available capital by a great margin. The firms are therefore provided with enough capital to venture into new business that will bring about more returns and growth.
A firm may use the acquisition decision to help sell more of its products to a market dominated by another company. This is where the known form is used to sell the products on behalf of the inferior firm. Buyers will buy more products hence the two entities will enjoy greater profits in the end. The cost of marketing is reduced in this case.
The economies of scale enjoyed by the joint firms are very low. When companies come together to produce or offer a service, the cost involved in generating it is reduced per unit of output. The technology applied is same to all products hence the production is done on great levels. More production brings about more sales and revenues while the cost is minimized.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Firms which agree to join together in the production process benefit from advanced technology. In an event where one company was using a more advanced system, the entire technology is adopted in production. This promotes efficiency with the use of raw materials hence high returns are enjoyed.
The market share taken up by a joint company is greater than that owned by individual firms. This is a reason why managers opt to merge their firms in markets dominated by many competitors. This will enable their products to sell more at maintain prices which will give them better profits. When companies come together, they are able to carry out market research on the nature of products which consumers want hence enough supply is done.
Employees have at times become beneficiaries of merging business entities. This happens when their salaries are reviewed upward. They get to earn better salaries at the same job group level. In some cases, promotions have been done and the junior staffs are promoted to higher ranks. This affects the performance of the company positively.
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