Mergers and acquisitions are beneficial to different companies due to the fact that companies are able to obtain quality staff as well as additional skills. This includes getting an opportunity to be acquainted with the industry as well as other business intelligence. In this regard, a business with sound management and development systems will be valuable to a buyer who desires to augment their own. A business is usually able to complement another, and this goes a long way in adapting to run a larger business.
It is usually less expensive to buy better production and distribution facilities than to set them up. In this way, a merger or an acquisition avails resources and precious assets for new enlargements. Another beneficial aspect of mergers and acquisitions comes from the fact that they offer opportunities to achieve additional dexterity, more understanding, and generally develop the acumen of a business as a result of other staff joining the business. These complement the business as well as create a stronger and more dominant novel business.
This kind of growth is certainly beneficial for a company that is underperforming. If a company desires to develop and has found several challenges in developing, it would be less costly to purchase an existing business to build on and eventually nurture a newly established company. Additionally, the newly established company will benefit from the distribution channels and systems that were previously in use. This ultimately increases the market share since the company will be in a position of accessing a wider customer base.
Another benefit of mergers and acquisitions arises from the fact that the overall costs of doing business as well as the overheads can be reduced. This is because the marketing budgets and purchasing power are shared. This kind of exponential growth also reduces competition thus allowing a company to purchase new products and services as well as properties. It is always cheaper to achieve these rather than developing and setting them up.
The Possible Challenges in Mergers and Acquisitions
One of the major problems that come up in M&A is the possible loss of skilled employees apart from employees in leadership positions. This type of loss negatively affects a business since it entails the loss of business know-how. In most cases, it is usually difficult to replace such employees. Additionally, when M&A take place, retrenchment is bound to be done. This causes panic and loss of motivation, which in turn leads to loss of output and a decline in returns.
Another challenge that comes up during M&A is reprehensible or deficient configuration of employee terms, conditions and benefits. This can also lead to fury, antipathy and a decline in motivation. In cases whereby customers are unhappy with a sudden take over, the new company may end up losing customers who may decide to go to other dealers for the same goods or services.
Another difficulty arises from the fact that management overloading may take place in the process of acquiring a company as a result of incompatibility of people or systems. This may also result in undercapacity. Additionally, merging two companies that have previously been doing similar activities may also result in duplication and overcapacity in a company that may be in need of retrenchments.