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Benefits Of Mergers And Acquisitions

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Introduction Mergers and Acquisitions form part of corporate restructuring. So does amalgamation, takeovers, spin offs, leveraged buyouts, buyback of shares, capital reorganization, sale of business units and assets etc. Mergers and Acquisitions are the most popular means of corporate restructuring. They have played an important role in the external growth of a number of companies in the world. The basic purpose of corporate restructuring is to enhance the shareholder value. But first, we should be able to understand what Corporate Restructuring is. Corporate restructuring refers to the changes in ownership, alliances and business mix with a view to enhance the shareholder value. Hence corporate restructuring may involve ownership restructuring, …show more content…

In this case every assets and liabilities are not individually valued and thus is a simple process. Benefits of Mergers and Acquisitions  Accelerated Growth Growth of any company leads to higher profits and increased shareholders value, provided other things remain constant. A company can achieve growth by either expanding its existing markets or entering into new markets. A company can expand or diversify its markets either externally or internally. If a company is not able to grow internally due to lack of managerial and physical resources, it can externally grow through mergers and acquisitions.  Enhanced Profitability The combination of two or more companies can raise the profitability of the company more than the average level due to efficient utilization of resources and cost reduction. These can happen because of economies of scale, operating economies and synergy. Economies of scale arise when increase in production causes the average price per unit to come down. Combination of companies can also reduce operating costs. Synergy implies a situation where the combined firm is more valuable than the sum of individual combining

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