Thursday, February 9, 2012

How Mergers and Acquisitions Affect Businesses

Mergers and acquisitions is a critical part of many businesses and it can have an impact on the general market as well. When a business merges with or acquires some other business, it completely changes the dynamic of that company and can have an impact on many employees.

A merger is a process by which two companies come together to form a single business entity. This is often done with companies in the same industry so that they can increase market share or bring in more customers. Mergers are sometimes completed because each company brings something special and unique to the table that the other company does not have. This could come in the form of specialized staff or intellectual property that is necessary to fulfill business objectives.

The other aspect of mergers and acquisitions deals with larger companies acquiring other companies. In some cases, big companies simply want to get rid of any potential competition, so they buy up many smaller companies. In other situations, the bigger company may want to gain access to a patent or product that the smaller company offers, so they simply buy the company. Then they take that idea and develop it with their greater resources and capital. This sometimes has the potential to bring solid products or services to a bigger market.

The area of mergers and acquisitions also sometimes deals with splitting up companies. When a company gets too big, it sometimes needs to split into multiple companies in order to avoid anti-trust laws. Sometimes a company may start working into many different areas and it wants to split into smaller subsidiaries so that it can focus on these specific areas. If a company gets too big, it may not be able to maneuver like it wants to. Dividing the company can make it more nimble and sometimes more attractive to investors. Whether splitting up a company or doubling its size, mergers and acquisitions can have a drastic impact on how companies operate.


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