Understanding Merger and Acquisition

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Mergers and acquisition (M & A) is considered to be one of the most important elements in the management forte as it is a source of strengthening the competence of a firm. For merger and acquisition, the communication skills are considered to be one of the most critical elements of the process. Interest has sparked in understanding the reasons and causes for the success of such ventures.

Defining a Merger

It is the process where two or more companies come together to form a single business. Hence, two or more independent businesses form a single entity following a merger. It can be undertaken when one company buys the stock or shares of the other or when shares or stocks are issued and exchanged with another firm.

There are several different reasons for mergers. One of the main reasons is for the elimination of competition, under a horizontal merger. Horizontal mergers indicate the act of one firm taking over another that produces identical goods or offers similar services. Another goal can be to add diversity to the products and services that are being offered by a company. On the other hand, vertical mergers themselves are anticompetitive and discourage the entry of new businesses. Vertical merging occurs when two businesses that have a buying selling relationship integrate.

What Top Dealers Do

The top dealers of mergers and acquisitions are individuals who apply great communication skills and employ specific tactics or behaviors for steering the deal in their favor. For them, success is not based in handling megamerger; however, they handle smaller deals that have lower risk factor. Their focus is on four key ingredients of a successful merger activity:

Basing the deal on an investment thesis. This involves the practice of evaluating the amount of value that a deal holds. A successful first step for a merger is based in the outline dictating the ‘how’ and the ‘why’ of a merger or an acquisition.

It is important to understand that not every deal that you stumble upon will be worth your time and attention. This step emphasizes on the importance of learning to say no to an unreasonable deal.

Under a merger, it will be important to identify, decide and choose the parts of a business that should be integrated and others that should be left out. This is a step where prioritization of business takes place.

Always have a contingency plan to help you get back on track in case a deal goes off track.

It is important for decision makers of a business deal to master the techniques and strategies of a merger and acquisition.

Source: www.britannica.comwww.masteringthemerger.com

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