MERGER OR ACQUISITION

Merger or acquisition

Merger or Acquisition

Introduction

Banks play a crucial role in propelling the entire economy of any nation, of which there is a need to reposition it for efficient financial performance through a reform process geared towards forestalling bank distress so, for this purpose, it is necessary to have mergers and acquisitions to better serve the economy.

Mergers

Merger is a formal process of two or more firms getting into a union to form into a single entity for the assets, and liabilities transferred by the selling firm and absorbed by the buying firm. In mergers shares transferred.

Acquisition

Takeovers or Acquisition occur between the target organization and the bidding organization. There might be friendly or else hostile takeovers. In the act of acquisition, the bidder company might purchase the assets or the shares of the company which is targeted.

Mergers and Acquisitions

Merger and Acquisitions used at most to have a competitive edge. There were several reasons that contribute to the M & As of the firms like, market share improvement, new markets entry, new product development with research and design etc. The main benefit of mergers and acquisition is that the acquiring firm considers the merger or takeover to a profitable investment. Secondly, the reduction in expenditure, in the corresponding fields. Another reason behind the mergers is that the merged firms can operate easily in the offshore overcoming the cross-border affect and even gains the potential to influence the government decision, as well.

M&A's and corporate re-structuring are now consideredconsidered being an important part of the corporate world. In this, two separate companies come together to form a successful organization. There are numerous theories related to mergers and acquisitions.

Theory of Operating Synergies

This theory states that the economies of scale do exist in industry and before mergers takes place; the activities performed by firms are insufficient in order to destroy the economies of scale. Operating economies of scale can be achieved through vertical, conglomerate and horizontal mergers. Operating synergies occur due to indivisibility of various resources such as equipments, overheads and people. It is also stated that the productivity of these resources will increase when they are divided over a huger number of units of production. For examples, the highly expensive equipments and machinery needs to be utilised at maximum level in order to decrease the cost per unit output.

Operating synergies includes economies of scale production and economies of flexibility. It relies less on tangible resources of the combining companies, but rather on team management skills, indigenous association's competence of participants, allowing them to achieve success in the competition and distinguish these companies in their competitive landscape. Operating synergies of the first kind leads to an increase in the efficiency of current operations reduce direct and indirect costs at different stages of development and promotion of the product to the customer. Operating synergies of the second type allows you to avoid additional investments: the development of a marketing network of the company, its market research, product promotion, and finally, in staff development ...