There are many companies which have been established to produce goods and services that are in high demand. The market has been very competitive because most products have close substitutes and have different features which buyers look at. This is why some firms have opted to join hands to produce similar products. The M&A have been effective in promoting competition and increase in the quality of goods produced.
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 scales involved in producing many similar products is very low. This translates to low cost of production per unit of each output that is generated. The firm is therefore able to produce very many products at a reduced amount. The reduction in expenditure and increase in revenues promotes more profits to the merger.
Mangers in individual firms often feel that they pay very high taxes to the proceeds they make every year. The reason why two or more small companies may come together is to earn high revenues which attract a considerable low tax rate. More money is saved after the tax has been deducted and can be used to pay the shareholders high dividends. This encourages the firms to continue expanding their production capacity.
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.
Mergers and acquisitions enjoy the ability to fix their own selling prices. The management is able to calculate the costs involved in producing a given amount of output. The revenue raised is as well estimated. This helps in fixing the selling prices which buyers will be willing to pay. The agreement helps in keeping the loyal customers.
Employees have at times become beneficiaries of merging business entities. This happens when their salaries are reviewed upward. They get to earn better salaries at the same job group level. In some cases, promotions have been done and the junior staffs are promoted to higher ranks. This affects the performance of the company positively.
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 scales involved in producing many similar products is very low. This translates to low cost of production per unit of each output that is generated. The firm is therefore able to produce very many products at a reduced amount. The reduction in expenditure and increase in revenues promotes more profits to the merger.
Mangers in individual firms often feel that they pay very high taxes to the proceeds they make every year. The reason why two or more small companies may come together is to earn high revenues which attract a considerable low tax rate. More money is saved after the tax has been deducted and can be used to pay the shareholders high dividends. This encourages the firms to continue expanding their production capacity.
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.
Mergers and acquisitions enjoy the ability to fix their own selling prices. The management is able to calculate the costs involved in producing a given amount of output. The revenue raised is as well estimated. This helps in fixing the selling prices which buyers will be willing to pay. The agreement helps in keeping the loyal customers.
Employees have at times become beneficiaries of merging business entities. This happens when their salaries are reviewed upward. They get to earn better salaries at the same job group level. In some cases, promotions have been done and the junior staffs are promoted to higher ranks. This affects the performance of the company positively.
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