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Mergers and acquisitions are strategic tools that offer ways to grow, market expansion and competitive advantage. However, they can also create challenges and risk. The complexities of M&A need to be understood by executives and managers navigating the M&A landscape.
M&As can bring a host of advantages for the acquiring and the target companies, such as the ability to scale up and improved purchasing power, improved distribution capabilities and access to new material and non-material resources, specific capabilities of the corporate, risk diversification, geographic expansion, and more.
The M&A could require a lot of time effort, money and effort. In the end, the companies involved might give up other opportunities. In addition an acquisition or merger can create diseconomies of scale for consumers since the combined market share could make them pay higher prices for products and services.
A hostile transaction could be an acquisition. In hostile transactions, the acquiring company gives the owners of the target company a sum above what they believe be the value of the business. The acquiring company then takes over the business it is buying thus removing any future competition and obtaining a larger market share.
The acquiring company can also purchase the assets of a target company leaving the target company with nothing other than cash (and perhaps some debt, if any). In this kind of transaction the acquiring firm typically does not retain the employees of the acquired company. It might hire some employees from the acquired company and keep its name.