The merger and acquisition (M&A), market is a key part of the growth strategy of many public companies. Large public companies with excess cash are usually looking for opportunities to acquire for inorganic growth. M&A is typically a merger of two companies in the same industry, with similar levels in the supply chain.
In general, a business may purchase another in exchange for cash, stock or debt. Sometimes, the investment bank involved in the sale of one firm will also provide financing to the company that is buying it (known as»strategy finance»).
M&A starts with an assessment of the target, which includes financial reports and business plans, as well as management plans, as well as any other relevant information. This process www.dataroomdev.blog/managing-tasks-with-the-project-management-software is referred to as valuation. It can be performed by the company that is buying it or outside consultants. Typically, the company performing valuation must consider more than only financial data, including the fit of its culture and other factors that will impact success of the deal.
The most common reason for a company to do a merger or acquisition is to grow. In addition, increasing the size of a company gives it economies of scale, which reduces operating costs and improves bargaining power with suppliers of raw materials, technologies or services. Another reason for diversification is that it improves the ability of a business to weather cyclical downturns or provide more stable revenues. Lastly, some companies acquire competitors to solidify their position in the market and remove the possibility of future threats. This is referred to as defensive M&A.