To answer to this question first it is important to understand what they exactly are and what their goal is.
Mergers and acquisitions have in general the objective of maximizing the wealth of the shareholders: it means that an acquisition should create an added value that exceeds the
cost of acquisition.
So what possiblilities can you create with M & A?
Synergies for example that increase the competitiveness far beyond what the two companies are expected to accomplish independently with the value of new company created exceeding the sum of the two previous companies.
It could mean operating and financial economies; and also less or not tax (if for instance the company acquired has accumulated losses).
And looking at the terminology we can identify as Corporate restructuring, all activities involving expansion or contraction of a firm’s operations or changes in its asset or financial structure;
and a Merger as a transaction in which at least one firm ceases to exist and the assets of that firm are transferred to a surviving firm so that only one separate legal entity remains; an Acquisition is a transaction in which both firms in a transaction survive but the acquirer increases its percentage ownership in the target; for Consolidation we mean the combination of two or more firms to form a completely new corporation; and last but not least we have the Merger of equals.
From the observation experts say that often companies that acquire with frequency and make it a major core competency tend to do well and perform better than their peers, but this is not a rule. We can add that buying without studying the possible creation of value and the future performances can lead to mergers and acquisitions that are destroying value.
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