The business world is very dynamic. Developments take place on a daily basis hence firms need to change their structure in order to operate efficiently in the market. There are many changes which happen affecting the way firms compete in the market. Formation of M&A has become a very useful survival technique by firms which are in highly competitive markets. This enables the firms to acquire a bigger market share and operate at a cost effective level.
It has been found that mergers and acquisition often lead to increased value generation. When the parent companies are merged together, the number of shareholders increase which increase the available capital by a great margin. The firms are therefore provided with enough capital to venture into new business that will bring about more returns and growth.
Joint companies are able to enjoy a bigger market share in a market that is highly competitive. When firms join to produce a given products, a firm whose products were initial registering low sales are branded with that of a known firm. This strategy has been found to improve the sales by a large percentage. Customers will continue purchasing the known brand thus the whole firm will have more returns in the long run.
When two companies join up to produce a particular product, the total cost per unit is reduced. The economies of scale are lower since production is done on a large scale and the technology used is similar. This enables more production and the cost is maintained at a level where maximum profits are reaped. Firms are therefore able to enjoy better profits in the long run and short run stages.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Merging is very effective in sharing of skills and technology which is very efficient. Companies have different technologies which are employed in the production process. Managers can therefore agree on one method which is effective in cutting down the expenses involved and maximize the revenues. No costs are incurred in this process since all decisions are agreed before implementing.
Mergers and acquisitions are effective in controlling the market prices. In markets where the firms are the price takers, the management can set the prices at which their products will be offered at. The price is set at a level where the customers will not be exploited and no super-normal profits will be earned. This helps to keep the market prices stable.
Other beneficiaries of Merges and Acquisitions are employees who enjoy better remuneration. Most companies tend to retain most of their employees even after forming a joint venture. The high profits earned translate to a better pay to all workers. Some also get promotions where they are taken to managerial staff. This improves their morale to perform better.
It has been found that mergers and acquisition often lead to increased value generation. When the parent companies are merged together, the number of shareholders increase which increase the available capital by a great margin. The firms are therefore provided with enough capital to venture into new business that will bring about more returns and growth.
Joint companies are able to enjoy a bigger market share in a market that is highly competitive. When firms join to produce a given products, a firm whose products were initial registering low sales are branded with that of a known firm. This strategy has been found to improve the sales by a large percentage. Customers will continue purchasing the known brand thus the whole firm will have more returns in the long run.
When two companies join up to produce a particular product, the total cost per unit is reduced. The economies of scale are lower since production is done on a large scale and the technology used is similar. This enables more production and the cost is maintained at a level where maximum profits are reaped. Firms are therefore able to enjoy better profits in the long run and short run stages.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Merging is very effective in sharing of skills and technology which is very efficient. Companies have different technologies which are employed in the production process. Managers can therefore agree on one method which is effective in cutting down the expenses involved and maximize the revenues. No costs are incurred in this process since all decisions are agreed before implementing.
Mergers and acquisitions are effective in controlling the market prices. In markets where the firms are the price takers, the management can set the prices at which their products will be offered at. The price is set at a level where the customers will not be exploited and no super-normal profits will be earned. This helps to keep the market prices stable.
Other beneficiaries of Merges and Acquisitions are employees who enjoy better remuneration. Most companies tend to retain most of their employees even after forming a joint venture. The high profits earned translate to a better pay to all workers. Some also get promotions where they are taken to managerial staff. This improves their morale to perform better.
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