Mergers & Acquisitions, more commonly known as M&A, is a broad term used to describe a wide range of activities related to the acquisition of one company by another. Generally speaking, any form of full or partial merger – two firms combining to form a new company – or the takeover of one company by another firm is considered a merger or acquisition.

M&A can involve a significant share purchase, the exchange of shares or the acquisition of cash assets. In the process of a merger, two companies combine to form a new, single business entity. In an acquisition, one company purchases another’s assets and absorbed it into its business in entirety. The resulting organization will bear the name of one or both of the companies that have merged or been purchased.

Companies often engage in M&A for numerous reasons, but the main two motives are usually financial gain and strategic advantage. When companies merge, they combine resources and business plans, which can lead to enhanced profits and lower costs. Corporations can also acquire another business to gain access to its technological or marketing advantages. Mergers and acquisitions also offer economies of scale and other cost savings, such as reducing marketing costs.

The process of evaluating a potential merger or acquisition transaction is complicated since it requires diligent financial analysis and careful consideration of the potential risks and rewards. Companies will first use metrics such as the firms’ market capitalization, financial positions and corporate structure to determine what fair market value for the transaction should be. Analysts then examine the strategic considerations of both firms in order to assess the impact that the merger or acquisition will have on the larger strategic objectives of each company. Ultimately, the performance of the new entity should be greater than the performance of each individual entity prior to the merger or acquisition.

In the end, mergers & acquisitions can be complex and risky financial undertakings with great potential rewards. By combining forces and sharing resources, companies can experience beneficial growth, increased efficiency and expanded market share. Any company engaging in M&A activities must exercise caution and take appropriate steps to ensure the most favorable outcome.