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What do you mean by Mergers & Acquisition(MA)?

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by Beroe Inc,
4 November 2022

What does Mergers & Acquisition(M&A) Mean?

The term "mergers and acquisitions" (M&A) is used for the coalition of businesses or their critical financial assets through business-to-business financial transactions. A company can completely buy out and absorb another business, merge with it to form a new business, take over some or all of its critical assets, make a tender offer for its stock, or launch a hostile takeover. All of them are M&A activities.

A merger is joining two businesses to create a new legal entity with a single corporate name.

M&A is one of the significant aspects of the corporate finance world. The general justification for M&A is that joining two distinct companies together creates more value than doing so separately. 

Companies continually assess various opportunities via the merger or acquisition route to maximize wealth.

Based on the alliance between the companies involved in the deal, mergers can be structured in the following ways:

  • Product-extension merger: Two businesses competing in the same market with various but related products.

  • Congeneric mergers involve two companies that serve the same domain in various ways, like a Led bulb manufacturer and an insulated wire company.

  • Horizontal merger: two businesses that share the domain and markets and are direct competitors

  • Vertical merger: a business and its client or supplier. Example, a merger of a Cheeze producer and packaging material supplier.

  • Market-extension merger: two businesses that operate in various markets and offer the same goods.

  • Conglomeration: two businesses with no shared industries.

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