Reasons for Mergers and Acquisitions
Why do mergers take place? It is believed that mergers and acquisitions are strategic decisions leading to the maximization of a company's growth by enhancing its production and marketing operations. They have become popular in the recent times because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of business is a number of economies are being deregulated and integrated with other economies. A number of reasons are attributed for the occurrence of …show more content…
Similarly, companies may want to combine to leverage costly manufacturing operations (as was the hoped for case in the acquisition of Volvo by Ford).
Capability may not just be a particular department; the capability may come from acquiring a unique technology platform rather than trying to build it.
• Broader Market Access
Merger is not the only route to obtain market power. A firm can increase its market share through internal growth or joint ventures or strategic alliances. Also, it is not necessary that the increased market power of the merged firm will lead to efficiency and optimum allocation of resources. Market power means undue concentration which could limit the choice of buyers as well as exploits suppliers and labor.
Positioning is taking advantages of future opportunities
• Eliminate Organizational competition
Acquiring human resources and intellectual capital can help improve innovative thinking and development within the company. To eliminate organizational competencies mergers will take place. It will create monopoly in the market. So they will be able to control the market as they prefer.
Taking advantage of future opportunities that can be exploited when the two companies are combined. For example, a