The merger and acquisition market (M&A) is a key component of a lot of public firms growth strategies. Large public firms that have surplus cash frequently look for opportunities to buy other companies to gain inorganic growth. For the most part, M&A involves two companies in the same industry at the same level of the supply chain, coming together to create value.
In general, a company could purchase another for cash, stock or debt. Sometimes, the investment bank involved in the sale of a company may also provide financing to the buyer company too (known as staple financing).
M&A typically starts with a thorough examination of the target company including financial reports, management and business plans, and other relevant data. This process is known as valuation and can be carried out by the company that is buying it or external consultants. Typically, the company that conducts valuation must take into account more than just financial information, like the fit of its culture and other factors that will impact www.dataroomdev.blog/managing-tasks-with-the-project-management-software success of the deal.
The most popular reason to create a merger is to boost growth. The size of the company increases its bargaining power and lowers costs. Another reason for diversification is that it adds to a company’s ability to weather cyclical downturns or generate more steady revenue. Some companies buy competitors to strengthen their position in the market and eliminate potential threats. This is referred to as defensive M&A.
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