What Does Acquisition Mean?

Acquisition means the act of acquiring or gaining possession. It is commonly used in the phrase Mergers and Acquisitions. It generally indicates the feature of business finance strategy and administrational dealing with the amalgamation and acquiring of various companies. Mergers generally are a tool used by corporate for the reason of increasing their operations and with that their profits.
Benefits of Mergers and Acquisitions are manifold. Mergers and Acquisitions can generate cost efficiency through economies of scale, can enhance the revenue through gain in market share and can even generate tax gains.

The principal benefits from mergers and acquisitions can be listed as increased value generation, increase in cost efficiency and increase in market share.

Benefits of Mergers and Acquisitions are the main reasons for which the companies enter into these deals. Mergers and Acquisitions may generate tax gains, can increase revenue and can reduce the cost of capital. The main benefits of Mergers and Acquisitions are the following:

Greater Value Generation Mergers and acquisitions often lead to an increased value generation for the company. It is expected that the shareholder value of a firm after mergers or acquisitions would be greater than the sum of the shareholder values of the parent companies. Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of economies of scale.

Merger & Acquisitionalso leads to tax gains and can even lead to a revenue enhancement through market share gain. Companies go for Mergers and Acquisition from the idea that, the joint company will be able to generate more value than the separate firms. When a company buys out another, it expects that the newly generated shareholder value will be higher than the value of the sum of the shares of the two separate companies.

Mergers and Acquisitionscan prove to be really beneficial to the companies when they are weathering through the tough times. If the company which is suffering from various problems in the market and is not able to overcome the difficulties, it can go for an acquisition deal. If a company, which has a strong market presence, buys out the weak firm, then a more competitive and cost efficient company can be generated. Here, the target company benefits as it gets out of the difficult situation and after being acquired by the large firm, the joint company accumulates larger market share. This is because of these benefits that the small and less powerful firms agree to be acquired by the large firms.

Gaining Cost Efficiency When two companies come together by merger or acquisition, the joint company benefits in terms of cost efficiency. A merger or acquisition is able to create economies of scale which in turn generates cost efficiency. As the two firms form a new and bigger company, the production is done on a much larger scale and when the output production increases, there are strong chances that the cost of production per unit of output gets reduced.

An increase in cost efficiency is affected through the procedure of mergers and acquisitions. This is because mergers and acquisitions lead to economies of scale. This in turn promotes cost efficiency. As the parent firms amalgamate to form a bigger new firm the scale of operations of the new firm increases. As output production rises there are chances that the cost per unit of production will come down

Mergers and Acquisitions are also beneficial

When a firm wants to enter a new market When a firm wants to introduce new products through research and development When a forms wants achieve administrative benefits To increased market share To lower cost of operation and/or production To gain higher competitiveness For industry know how and positioning For Financial leveraging

To improve profitability and EPS

An increase in market share is one of the plausible benefits of mergers and acquisitions. In case a financially strong company acquires a relatively distressed one, the resultant organization can experience a substantial increase in market share. The new firm is usually more cost-efficient and competitive as compared to its financially weak parent organization.

It can be noted that mergers and acquisitions prove to be useful in the following situations: Firstly, when a business firm wishes to make its presence felt in a new market. Secondly, when a business organization wants to avail some administrative benefits. Thirdly, when a business firm is in the process of introduction of new products. New products are developed by the R&D wing of a company.

Employee Benefits under Mergers and Acquisitions in US The 'Employee Retirement Income Security Act' was enacted in 1974. It is also known as ERISA. Since then programs for employee benefit have been a major component of the balance and income statements of US business organizations. Current law promulgations have attached supreme importance to the presence of post retirement pension schemes and welfare benefit schemes as a part of corporate obligation. As a result employee benefit programs are affecting the viability of mergers and acquisitions in the USA.

Expenses accruing due to employee benefit programs may not be fully reflected in a company's balance sheet. Some employee benefit obligations may arise out of a change in the corporate structure of a firm. Retirement income schemes and benefit plans may vary from company to company. Companies going for mergers and acquisitions strive to iron out the internal differences to maintain a specified level of employee satisfaction.

Mergers and Acquisitions (Information) Merger and Acquisition Process

The Deal of Merger or Acquisition Failure of Mergers and Acquisitions Important Terms Relating to Mergers and Acquisitions Impact of Mergers and Acquisitions Benefits of Mergers and Acquisitions Difference Between Merger and Acquisition Costs of Mergers and Acquisitions Mergers and Acquisitions Law Merger and Acquisition Accounting Mergers and Acquisitions History De-Mergers Reasons Behind Mergers Merger and Acquisition Statistics Valuation Related to M and A Hostile Takeover and Friendly Takeover Merger and Acquisition Strategies Merger and Acquisition Trends Corporate Mergers and Acquisitions Insurance Mergers and Acquisitions Airline Mergers and Acquisitions International Mergers and Acquisitions Mergers and Acquisitions 2005 Mergers and Acquisitions 2006 US Mergers and Acquisitions Mergers and Acquisitions in China

Mergers and Acquisitions in India Mergers and Acquisitions in Indian Telecommunication Industry Merger and Acquisition in Mortguage Industry Failed Mergers and Acquisitions in India

Relevant Related Links:Benefits of M&A Impact of M&A M&A in India Process of M&A M&A Accounting M&A Strategies Airline M&A Failure of M&A International M&A Corporate M&A Reasons behind Mergers

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