How do mergers and acquisitions take place?

Merger refers to the creation of one new enterprise by combining two or more business entities. A takeover is an agreement in which one company establishes control over another by acquiring its securities or part of the authorized capital. At the same time, the second company remains self-sufficient.

Types of mergers and acquisitions

The number of these two types of transactions concluded worldwide reaches approximately 15,000 annually. Most of them are in the USA. Mergers and acquisitions have subtypes of agreements. For example, merges are divided into vertical and horizontal. The first option implies a merger of companies, in which one will be engaged in the supply of raw materials. The second option, horizontal, is the integration of enterprises producing one type of product. There is also a generic and conglomerate association of firms. The first describes the integration of entities that produce products that are somehow connected to each other. The conglomerate type of transaction implies that enterprises work for different sales markets. The reason why companies make decisions to merge is as follows: they strive for growth, improve the management of the enterprise, want to surpass competitors and develop more dynamically. The takeover takes into account such a significant advantage as the already created basis for work. When buying a part of the company’s securities, its affairs do not need to be adjusted from scratch. You can use the existing developments and achievements. After the conclusion of mergers or acquisitions, firms can count on their products to enter the international market. And this is a completely different level: the company is included in the competition with global players. In Belarus, large amounts of money are invested in existing enterprises, but investments are not always enough to make the goods produced competitive in the international arena. Experts believe that mergers and acquisitions will come to the Republic of Belarus, it is only a matter of time. There are a lot of positive aspects in this process. The company will have a chance to work internationally, sell its goods all over the planet, attract investors from all over the world, exchange accumulated knowledge and experience with colleagues from all over the world. If you have decided to conduct a merger or acquisition of an enterprise, you need to contact professionals specializing in this topic. By choosing a good lawyer, you minimize the risks and will have a successful outcome of the transaction.

Pros and cons of absorption

After the procedure is completed, the new company receives:

1. The possibility of selling products in new countries or regions if the partner company is located elsewhere. There is also a merger of customer bases, the list of services provided is expanding.
2. The potential increases several times: due to the fact that the new company will use the experience and technologies of both firms, the number of employees and the volume of the resource base increases. All these factors have a beneficial effect on business.
3. The actions of a company that finds itself in a takeover situation are controlled more strictly.

The disadvantages of the absorption process include:

1. The founders sometimes cannot come to a compromise, resulting in conflicts.
2. The high cost of the takeover procedure.
3. The departure of old customers.

A change in corporate policy, as a result of which valuable personnel may begin to leave the company.