Benefits of Undertaking Mergers and Acquisitions

There are several potential advantages to participating in M&A transactions. The most obvious benefit is the potential to build a more competitive company. A company that acquires another company gains access to new technology, resources, and a larger customer base.

It can also cut operational costs by eliminating redundant departments and positions. Analytica Consultant’s well-executed CFO service provider assures the M&A transactions can give a company a competitive advantage in the market.

• Economies of Scale
• Economies of Scope
• Synergies in Mergers and Acquisitions
• Benefit in Opportunistic Value Generation
• Increased Market Share
• Higher Levels of Competition
• Access to Talent
• Diversification of Risk
• Faster Strategy Implementation
• Tax Benefits

1.    Economies of Scale

The promise of economies of scale to underpin all M&A activity. The advantages of growing include: 

• Increased access to capital,
• lower costs as a result of higher volume,
• better bargaining power with distributors, and more.

Analytica Consultants can be a valuable partner in achieving economies of scale for businesses and a potential service provider for your needs.

While buyers should always avoid the urge to partake in “empire building,” larger companies usually enjoy advantages that smaller companies do not.

2.  Economies of Scope

Mergers and acquisitions bring a sustainable competitive advantage that organic growth does not always provide. One need only look at Facebook to see that this is true. Even though its platform allows users to share photos and contact companies involved in the merger. This helps identify potential risks and opportunities for synergies.

Some of the best transactions take place when a business isn’t even actively looking to acquire another one. The purchase price for these deals is typically lower than the net assets of the target company’s fair market value. These businesses frequently have some financial difficulties, but deals can be negotiated to keep them operating while the buyer gains immediate value as a direct result of the purchase.

3.  Synergies

Synergies are typically described as ‘one plus one equaling three’: the value that comes from two companies working together in tandem to make something far more powerful.

An example is provided by Disney acquiring Lucasfilm. Lucasfilm was already a huge cash generator through the Star Wars franchise, but Disney can add theme park rides, toys, and merchandise to the customer offering. Analytica Consultants can help identify synergies by analyzing the business processes of the merging companies. By identifying areas of overlap and inefficiencies, they can recommend changes that will optimize operations and reduce costs.

4.   Talent Availability

The answer will almost always be some variation of “people that can code” if you ask anyone in the recruitment sector where the biggest talent shortages currently exist. Identification of Key Talent: Analytica Consultants can help identify key talent within the merging companies. This includes assessing the skills, experience, and potential of employees to determine who will be critical to the success of the merged entity.

5.   A significantly larger share of the market

Increased market share is one of the more prevalent reasons for M&A. There has always been significant industry consolidation in retail banking because historically, retail banks have considered their regional footprint to be essential to gaining market share (the majority of nations have a set of “Big Four” retail banks). Santander, a Spanish retail bank, is a notable example because it actively pursues the purchase of smaller banks, which has helped it grow into one of the biggest retail banks in the world.

6.   More intense competition

Analytica Consultants can help businesses optimize their operations to increase efficiency and reduce costs. This can include identifying areas where automation or outsourcing may be beneficial, or finding ways to streamline existing processes to improve productivity. In theory, a corporation becomes more competitive as it grows larger. As an illustration, dozens of new businesses are currently penetrating the market for plant-based meat and offering a variety of vegetable-based “meats.”

7.   Risk Diversification

This is related to economies of scope: A corporation can distribute risk among its various income streams by having more of them rather than concentrating on just one, as a result of having more revenue streams. 

8.  Faster Deployment of the Strategy

The best way to transform a long-term strategy into a mid-term strategy may be through mergers and acquisitions. Consider a scenario in which a business wishes to enter the Canadian market. It may start from scratch and hope to achieve the desired scale in five to ten years. Alternatively, it may be a company, with its customer base, distribution, and brand value, and gain from them all after the acquisition is completed.