Merits And Demerits Of Mergers And Acquisitions

Today`s commercial and business market is highly competitive and it has become important for every business concern to show its competitiveness in the finest form to win a position in the market. Apart from this the economy and the market are going global. So the challenges for a businessman are not just from the competitors of the local or domestic market but also the international market. So he needs to hone his skills and sharpen his marketing and business knowledge according to the international standards. The major goal or intention of any businessman these days is to grow fast, be the best at the same time reach the top of the market as soon and as early as possible. So for this, he tries out all possible legal ways to achieve this and one major decision in these lines is the merger and the acquisitions.

There are both advantages and disadvantages in these and a businessman is required to understand and analyze all these before he takes this massive step of either getting merged or while acquiring another company.

Advantages

  • One major advantage for the acquiring company is the power of control. By acquiring a good and profitable company in the market, the other company or the acquirer enjoys the power of control over the other line of business or service too apart from his or their regular line of business.
  • The cost of trials comes down. Yes, whenever a company wants to try out something new in the market, new concept or technique, the cost gets shared by the other thus the cost for each gets low.
  • The acquiring company enjoys synergy in the name of increased efficiencies and improved performances which in return comes back to the owner in the name and form of increased profits and returns.
  • By merging or acquiring another company the acquiring company gets tax rebates to a great extent. Yes, they can get into different and new methods of tax savings by investing in some new technique or concept, get into a new alternative and this way enjoy tax benefits.

Disadvantages

  • When mergers and acquisitions happen, there are all possibilities that the skilled and experienced employees lose their jobs or they might be forced to forego their senior positions.
  • The already performing employees might be put under rigorous training to learn and understand the new concepts and aspects of the business of the acquiring company.