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The Merger and Acquisition Market
The merger and acquisition market is among the most lucrative and dynamic opportunities in the field of corporate finance. While it is not a plan that every company can consider, for those who can make it work, M&A can create tremendous growth potential. M&A transactions are generally complex and require careful planning and execution to be successful. The M&A begins with an initial assessment of the business. This may include high-level discussions between buyers and sellers to assess how the companies could be integrated strategically, how their values align, and what potential synergies could be created.
After the initial assessment is completed, the acquiring company could make a preliminary offer to the company that it is interested in. Depending on the situation, this can be done by way of an outright acquisition or a tender offer. An outright acquisition involves the buyer purchasing all shares of the company targeted. This is done without the board directors or management of the company targeted.
A tender offer is, however allows a publicly traded company to contact shareholders of a publicly owned company and offer to buy their shares for a price that is agreed on by both parties. This is a type of a hostile takeover and requires the approval of the shareholders of the target company before it is able to be finalized.
The possibility of gaining savings in revenue and costs through the merger of two businesses is the primary reason behind companies to consider M&A. If a car manufacturer purchases an established seat belt manufacturer, it can benefit from economies of scale which will lower the cost per piece as production grows. M&A can also be used by companies to gain access to technologies that would be costly or time-consuming to develop on their own.
