1. Mergers & Acquisitions
Now, this course is not really going to focus on mergers and acquisitions
or M&A, but it's important for us to have a basic understanding of
what it is. Essentially M&A is the process of companies either buying,
selling or combining businesses. One useful thing to remember is that companies
often make a decision about whether or not they want to buy it
or build it. They can build their own expansion capacity or they can
go and buy it from another company, who's already built it,
which would be M&A. So let's now look at some benefits and some
potential drawbacks of buying it or doing mergers and acquisitions. First
of all, there can be cost savings, if we're able to find a
company that's up for sale at a reasonable price.
Another potential benefit of M&A could be revenue enhancements or revenue
synergies, as they're often called. We could also quickly increase our market
share by acquiring another company. And finally, another benefit of M&A
could be that it could enhance financial resources, partly because we may
be able to find a company at a decent price, or because it
can be very quick and efficient to buy another company.
Now if we look at the potential drawbacks of M&A, there could be
a drawback if we overpay for an acquisition or the large expenses associated
with the investment. And finally, another potential drawback is there could
be a negative reaction to the merger or acquisition resulting in a depressed
share price.
2. Let's practice!