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Appreciating significant value (Part 2)

01 August 2019 Jonathan Faurie

Last month, we published a blog post regarding the value of mergers and acquisitions. 

However, there is more to the debate that meets the eye. 

Additional metrics

There are other metrics that need to be considered when dealing with the M&A debate. 

The article points out that, when a company reaches to the peak of success or loss, and looks for revenue through other source, merger and acquisition takes place. 

Companies generally look for increase in the market share with already established company that changes the face of the organization. In other words, mergers may generate tax gains and reduces the cost of capital which is generally high to run for a single company. 

Consult the professionals

The article adds that there are advisory companies that organize the merger and acquisition seminars to bring companies together at one stage. Generational Equity is one such investment banking firm that offers financial advice to privately held middle market. 

The company offers valuations, exit strategy planning, management buyouts and other essentials for smooth run of business. 

Let us check the benefits of mergers and acquisitions: 

Greater value of generation

Generally it is seen with the M&A, company’s value generation increases. Moreover, the value of shareholder increases compared to the value in parent company. 

Benefit in tax gains

One of the benefits of the merger is the tax gains and revenue enhancement through market share. Joint companies generally expect more value from separate firms after merger. 

Good option to overcome the current situation.

If a company suffering from various financial or business issues, the best thing to do M&A. An acquiring company needs to have a good strong hold in the market, which deals in buying weak firm under cost effective deal. This is beneficial for both loss making and acquiring company and get into new strategy. 

Cost efficiency

This is the major benefit a company can have under M&A. It helps in creating economies of scale which in turn generates good cost efficiency result. 

When two companies merge, the production takes place in large scale which in turn increases the output production and cost of per product production is reduced. 

There are also other benefits with M&A: 

-              A firm looking to enter into new market;

-              When the firm wants to introduce new products;

-              To bring down the cost of operation;

-              To gain higher competitiveness;

-              To gain financial leveraging; and

-              Merger and acquisition proves useful when either of the company wants to get into new market. There is a long but required process that both companies need to undergo before getting into the merging process. 

There can other schemes and financial benefits for employees after the merger, which depends on the condition of both companies. With having multiple benefits, many companies are now getting into this process for further business growth.

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