Mergers and Acquisitions and Market Share Essay Example for Free

Mergers and Acquisitions and Market Share EssayMergers and Acquisitions refers to the aspect of corporate strategy, corporate pay and look atment dealing with the buying, selling and combining of different companies that can aid, finance, or help a maturement company in a given industry grow rapidly without having to create an early(a)(prenominal) ancestry entity. A merger is a combination of two companies to form a new-fashioned company, while an skill is the purchase of one company by another in which no new company is formed. interpretation The main idea One plus one makes three. The equation is specially based on Merger or Acquisition. The key principle behind buying a company is to create persona holder value over and above that of the sum of the two companies. Two companies together are to a greater extent valuable than two separate companies together.1. AcquisitionAn acquisition is the purchase of one company by another company. Acquisitions are actions through wh ich companies seek economies of exfoliation, efficiencies and enhanced mart visibility. All acquisitions involve one firm get another there is no exchange of rakehell or consolidation as a new company. Acquisitions are often congenial, and all parties feel satisfied with the deal. Acquisition has become one of the most frequent ways since 1990. Companies choose to grow by acquiring others to increase market share, to gain access to bright new technologies, to achieve synergies in their operations, to tap well-developed distribution channels, to obtain control of undervalued assets, and a myriad of other reasons. So, because of the appeal of instant growth, acquisition is an increasingly common way to expand.2. Mergers The combining of two or more entities into one is called merger. Therefore, a merger happens when two firms agree to go forward as a wiz new company rather than remain separately owned and operated.What makes Mergers and Acquisitions? These motives are consider ed for making of mergers and acquisitions1. Economy of scale This refers to the fact that the combined company can often reduce its fixed costs by removing retroflex departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing benefit margins.2. Economy of scope This refers to the efficiencies primarily associated with demand-side changes, such as increasing3. Synergy Better use of completing resources.4. Taxes A profitable company can buy a passing maker to use the targets loss as their advantage by reducing their tax liability.5. Geographical Diversification This is designed to smooth the stipend results of a company, which over the long term smoothen the stock price of a company, giving conservativist investors more confidence in investing in the company.6. Empire building Managers have larger companies to manage and hence more power.7. Increased revenue or market share This assumes that the buyer will be absorbing a major competitor and thus increase its market power (by capturing increased market share) to set prices.8. Cross-selling For example, a bank buying a stock broker could then sell its banking products to the stock brokers customers, while the broker can sign up the banks customers for brokerage accounts. Or, a manufacturer can rent and sell complementary products.9. Resource Transfer Resources are unevenly distributed across firms and the interaction of target and acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce resources.