Mergers and acquisitions (M&A) refer to the process of combining or consolidating two or more companies into a single entity, usually through the purchase or transfer of either a majority or all of the ownership interests of one company by another. It is a strategic business activity that involves restructuring the ownership and management structures of the involved entities.
Mergers occur when two or more companies voluntarily agree to combine their operations and assets to form one new entity. This new entity becomes the successor organization, absorbing the assets, liabilities, and operations of the merging companies. Conversely, acquisitions take place when one company acquires another, resulting in the acquiring company having control over the acquired company's assets, liabilities, and operations. Acquisitions can be friendly or hostile, depending on the level of willingness and agreement between the parties involved.
The primary goals of mergers and acquisitions include achieving economies of scale, expanding market share, diversifying product or service offerings, gaining synergies, reducing competition, and increasing profitability. M&A transactions can involve various financial and legal complexities, including valuation of companies, negotiation of terms, due diligence, and regulatory compliance.
Mergers and acquisitions have become integral to driving growth, strategic positioning, and improving competitiveness in the business world. They are practiced across industries, including finance, technology, healthcare, and manufacturing. However, the outcomes of M&A activities can vary widely, as they can be successful in realizing anticipated benefits or may lead to unexpected challenges, financial risks, or cultural integration issues.
