The Mergers and Acquisitions are one of the most talk about events of the corporate sector. There are several purposes of mergers and acquisitions. Some of these are business purposes and some are political. But the general purposes of mergers and acquisitions are to generate more profit for the newly built companies and to diversify their operational domains.
At the same time, expanding the company’s business in different geographical regions is also a reason of mergers and acquisitions.
Reasons Behind Mergers and Acquisitions
Through merger of companies of the same sector, the manufacturing costs can be reduced and sale of the products can be boosted. At the same time, growth of the market share and absence or elimination of a major competitor from the market can change the whole scenario.
Each and every company has some regular clients and merger and acquisition of the companies can provide the new company with an enlarged customer base than what was there before the merger. All these will help the company to make more profits.
The merger or acquisition of two major companies can also provide the new companies with resources of both the companies. These resources can help the new company to develop easily.
The mergers and acquisition activities are also very effective for tax saving because whenever a big company in good financial condition purchases a smaller company with several debts and losses, the big company gets some advantage regarding tax payment. This is one of the purposes of mergers and acquisitions .
At the same time, there are some mergers that have taken place to gain some special business ratings or certain standards. The purposes may be of acquiring any special permission that can only be availed by companies with a certain amount of experience, monetary resource and size.
Apart from these, there are a number of other purposes of mergers and acquisitions. The above said reasons are related directly to the client base or to the customers but the reasons like diversification that can provide coverage to the company against the market risks are not directly related with customers.