The business world has been growing very fast over the years. This has brought about developments in many firms as they try to adapt to the changes taking place. M&A have been found to be very effective in terms of promoting efficiency through economies of scale. This brings about high revenue collection by the firms and the cost of running them is minimized. Firms are therefore able to survive in the highly competitive markets where they operate.
There are benefits which managers expect by forming mergers with other entities. The main reason is that the capital owned by the joint company is increased. All shareholders from the parent companies are brought together and contribute the capital at new interest rates. If the rates are very attractive, more capital is raised for investing into new ventures with better rewards.
A firm may use the acquisition decision to help sell more of its products to a market dominated by another company. This is where the known form is used to sell the products on behalf of the inferior firm. Buyers will buy more products hence the two entities will enjoy greater profits in the end. The cost of marketing is reduced in this case.
The economies of scale enjoyed by the joint firms are very low. When companies come together to produce or offer a service, the cost involved in generating it is reduced per unit of output. The technology applied is same to all products hence the production is done on great levels. More production brings about more sales and revenues while the cost is minimized.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Firms which agree to join together in the production process benefit from advanced technology. In an event where one company was using a more advanced system, the entire technology is adopted in production. This promotes efficiency with the use of raw materials hence high returns are enjoyed.
The market share taken up by a joint company is greater than that owned by individual firms. This is a reason why managers opt to merge their firms in markets dominated by many competitors. This will enable their products to sell more at maintain prices which will give them better profits. When companies come together, they are able to carry out market research on the nature of products which consumers want hence enough supply is done.
Over the years, merging has been known to benefit the company itself. Employees also stand a chance of gaining from this kind of decision. This is where some are moved to higher ranks of management to the new business entity. In some cases, the employees get a reward through better pay which improves their welfare.
There are benefits which managers expect by forming mergers with other entities. The main reason is that the capital owned by the joint company is increased. All shareholders from the parent companies are brought together and contribute the capital at new interest rates. If the rates are very attractive, more capital is raised for investing into new ventures with better rewards.
A firm may use the acquisition decision to help sell more of its products to a market dominated by another company. This is where the known form is used to sell the products on behalf of the inferior firm. Buyers will buy more products hence the two entities will enjoy greater profits in the end. The cost of marketing is reduced in this case.
The economies of scale enjoyed by the joint firms are very low. When companies come together to produce or offer a service, the cost involved in generating it is reduced per unit of output. The technology applied is same to all products hence the production is done on great levels. More production brings about more sales and revenues while the cost is minimized.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Firms which agree to join together in the production process benefit from advanced technology. In an event where one company was using a more advanced system, the entire technology is adopted in production. This promotes efficiency with the use of raw materials hence high returns are enjoyed.
The market share taken up by a joint company is greater than that owned by individual firms. This is a reason why managers opt to merge their firms in markets dominated by many competitors. This will enable their products to sell more at maintain prices which will give them better profits. When companies come together, they are able to carry out market research on the nature of products which consumers want hence enough supply is done.
Over the years, merging has been known to benefit the company itself. Employees also stand a chance of gaining from this kind of decision. This is where some are moved to higher ranks of management to the new business entity. In some cases, the employees get a reward through better pay which improves their welfare.
About the Author:
If you need the facts about M&A, go to the web pages online here today. Additional details are available at http://abuchholtz.com now.
No comments:
Post a Comment