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The Merger and Acquisition Market

The market for mergers and acquisitions is one of corporate finance’s most dynamic and lucrative markets. M&A is not a method that every business can implement however, for those who can, it could provide enormous potential for growth. M&A transactions can be complicated and require careful planning and execution to be successful. The M&A starts with an initial evaluation of the business. This could involve high-level discussions between sellers and buyers to assess how the companies can be strategically integrated and what their values are aligned and what synergies may exist.

Once the initial review is completed, the acquiring firm could make a preliminary offer to the company that it is interested in. Depending on the situation it can be made through either an outright acquisition or a tender offer. A company can buy all shares of a company as an outright acquisition. This is performed without the board of directors or the management of the company that is being targeted.

A tender offer is, however, allows a publically traded company to contact a publicly owned company’s shareholders and offer to buy their shares at a price agreed upon by both parties. This is a type of a hostile takeover, and requires the approval of the targeted company’s shareholders before it is able to be finalized.

The primary reason for a business to pursue M&A is the potential to gain revenue and Read More Here cost synergies through the combination of the two companies. For example when a car manufacturer buys a company that manufactures seat belts, it will be able to achieve economies of scale and lower the cost per unit as production increases. M&A is also utilized by companies to access technologies that would be costly or time-consuming to develop in-house.

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