Appreciating significant value (Part 1)

05 June 2019 Jonathan Faurie

The world is characterised by the symbiotic mix of the existence of larger corporates and smaller companies that are often referred to as small medium and micro enterprises (SMME). 

Both of these companies have their place in the world. Larger corporates can deal in great volumes and garner a lot of trust because of their existence and the fact that they will stand the test of time because their size. SMMEs show value by virtue of the fact that because they are smaller, they can focus on one specific area of business and become experts in it building up critical skills along the way. 

A word of caution needs to be introduced here. The survival of these companies largely depends on the economy. In depressed economic markets, or markets that are inherent with risks, the public prefers safety in volume. The biggest casualties of a depressed economic climate are SMMEs.

An important lifeline

This is why mergers and acquisitions (M&A) is very important. I recently read an article which points out some of the benefits of this kind of activity. 

The article points out that starting a business has become rather easy, however, growing it is usually harder once a company has reached a certain point. One of the best ways of growing an existing company is through mergers and acquisitions. 

It is also worth noting that mergers and acquisitions are regulated in countries all over the globe and they come with many advantages. Let’s find out below the seven most important advantages of merging with or acquiring another company. 

Mergers and acquisitions can come with various tax advantages

The article points out that many governments offer tax cuts or reductions when a merger or acquisition is completed. Among these, Singapore is one of the best Asian countries where a merger or acquisition could take place in. 

Opening a business in Singapore by merging or acquiring a smaller existing company can attract substantial tax advantages in this country. 

New possibilities offered by a new market

The article adds that one of the greatest struggles a business owner can face is related to entering a new market. Even if setting up a branch or subsidiary is a good idea; a merger or acquisition will save time and money spent on starting a business from scratch. 

Imagine wanting to enter the Dutch market: there are so many small companies operating in the Netherlands and many of them can be purchased and expanded in a market in which they already have their own share of loyal customers. As a bonus, the foreign business owner will also be entitled to obtain a Dutch residence permit and that allows a move to one of the greatest countries in Europe. An experienced immigration lawyer in the Netherlands can help foreign investors obtain a Dutch residence permit. 

Obtaining easier access to a skilled labour force

The article points out that one of the conditions for merging with or acquiring another company is to retain the staff and integrate them in the new company. These are legal requirements imposed by national and international regulations. The UAE is one of the countries which has imposed strict regulations related to international mergers and acquisitions. The good news is that if you plan on starting a company in Dubai by taking over another business, you will benefit from skilled and English-speaking employees as most workers there speak English. 

You can diversify your portfolio

The article adds that one of the most important advantages offered by mergers and acquisitions is related to a wider range of services or products which can be explored. 

By joining forces, the portfolio of the new business can increase even more and gain access to a larger market share. This is usually the case of IT companies in which innovation plays a key role. Taking over a Hong Kong company could be a very good idea when talking about innovation and international IT centres. 

Buying or merging with another company is usually cheaper

The article pointed out that building production centres, storage, and distribution facilities are all quite expensive, but buying or merging with a company, even if from another country, which already has such facilities, will turn out way cheaper than building new ones. 

One of the cheapest Asian destinations from this point of view is Malaysia. Setting up a business in Malaysia by buying an existing company which has such facilities can mean a significant economy related to the expansion costs. 

Better access to a larger market

The article added that, back to the market share, small countries make great development markets for companies. As a matter of fact, the smaller the country the larger the access to its market will be by taking over a company there. Ireland is one of the best countries to do that. Establishing a business in Ireland by taking over small but well-known companies are quite often met. 

Mergers and acquisitions can mean greater financial power and more influence

The article pointed out that mergers and acquisitions represent growth for both companies involved in the transaction. Moreover, it will mean more financial power as the revenue generated by pooling the incomes of both businesses. 

As a chain reaction, having a greater financial power will also mean occupying a larger share of the market and having more influence over the customers by reducing the competition.

 Mergers and acquisitions have many benefits and we have only analyzed a few of them. Being very well regulated, these types of actions will definitely attract more advantages depending on what the companies undergoing the taking-over follow and what they negotiate. 

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