A merger can be motivated by a desire to acquire certain assets that cannot be obtained using other methods. In M&A transactions, it is quite common that some companies arrange mergers to gain access to assets that are unique or to assets that usually take a long time to develop internally.

What are the motives for acquisitions?

1. Economies of scale that may arise from the merger, allowing the combined firm to become more cost-efficient and profitable. 2. Greater pricing power from reduced competition and higher market share, which should result in higher margins and operating income.

Which is one motive for M&A?

2. Diversification. A commonly stated motive for mergers and acquisitions is to achieve risk reduction through diversification. The extent, to which risk is reduced, depends upon on the correlation between the earnings of the merging entities.

What is the purpose of takeover?

To increase market share; To achieve market development by acquiring one or more companies in new geographical territories or segments, in which the activities of the acquirer are absent or do not have a strong presence.

What is a strategic motive?

1 adj Strategic means relating to the most important, general aspects of something such as a military operation or political policy, especially when these are decided in advance.

What is the difference between a horizontal merger and a vertical merger?

Horizontal merger: When companies that sell similar products merge together. Vertical merger: Occurs between companies at different stages in the production process (between companies where one buys or sells something from or to the company).

What is takeover explain the concept of takeover?

A takeover occurs when one company makes a successful bid to assume control of or acquire another. Takeovers can be done by purchasing a majority stake in the target firm. They can be voluntary, meaning they are the result of a mutual decision between the two companies.

What are the financial motives for takeovers and mergers?

Financial motives. All takeovers and mergers have financial motives of one kind or another – each is designed to achieve a satisfactory rate of return for the investment and risk been taken, However, there are also circumstances where the underlying motive for the transaction is financial rather than strategic.

What is a takeover of a company?

It is a form of acquisition of a company rather than a merger. Takeovers are always a reality in the competing world of business. Merger and acquisition transactions depend a lot on the approval of a target company. It is not rare to find companies merging together with each other’s consent.

What are managerial reasons for takeover failure?

Managerial motives. When a takeover or merger fails, you can often trace it back to what are called “managerial motives”. In general these are bad news for the shareholders of a business that is pursuing the takeover; it often results in a transaction that destroys significant amounts of shareholder value.

When does an acquisition transaction become a takeover?

An acquisition transaction becomes a takeover when the acquiring company purchases the target may or may not through a mutual agreement with the management of the target company. In case, it is through a mutual consent, it’s a friendly takeover whereas if it not, it is called a hostile takeover.