Mergers and Acquisitions

Merger and Acquisition . 1

Introduction

Merger and Acquisition are the two most common used words of today 's business world . Now every businessperson has realized that if they want to live in the business for long term , then they would necessarily have to grow . Growth in business is now as much necessary as much as blood is for viens

Growth in business means either Integration or diversification Integration can be both forward and backward . For instance , if a car making company opens it retail outlets for display of car then it

is forward integration . And if the same company buys a steel and Iron producing plant than it will be backward integration . Diversification is another method of growth of a business . Let 's take the same car making company example . Say if a car making company starts its production for rubber wheels , car accessories or may even go for another line of production like fabrics , furniture etc . than its called diversification

Let 's now have a view why these Merger and Acquisition take place

Need of Merger and Acquisition

Merger and Acquisition started with the aim of retaliating against the increasing competition in the market . After the Industrial revolution their were a number of industrial units set up to gear up the supply of various items that can be sold in the market and that too at low rates The results were an increase in supply and competition to sell products To overcome this problem of competition , various small companies agreed to make Mergers , while the big companies started making Acquisition

Through merger of two or more companies , one big company is created which could fight the growing competency in the market . The expertise of various small industries was used in a way to help all other merged companies to stay alive in the growing competition . Not only that , when these merged companies proved their supremacy over the market as leaders , their rates were also set to give them comfortable profit margin thereafter . Thus the result was the benefit of all those units who joined hands , came together and shared their synergy with the other companies in the group

Acquisition also started due to Industrial revolution . When some small units were not able to cope up with the growing competition they got closed or their wanted to sell their properties so as to get a break out . At such time the big business owner 's used to buy these small and shutting down business units so as to increase their production capacity and use the plus points of that very units to increase profit margins Acquisition of other business units , which are by no way connected to the present business , is also observed from the last few decades . That is a car making company is buying shoe-making units , Cloth manufacturing unit etc

Thus through Integration and diversification the existence of the business for the longer period is confirmed . Merger and Acquisition is a tool achieves this goal

A case study...