Learn About Mergers and Acquisitions (M&A) in Singapore

Posted by InCorp Global on October 29th, 2021

Understanding the Mergers and Acquisitions (M&A)

Mergers and acquisitions is the process of combining two business entities into one. However, they\\'re different.

Mergers happen when two companies join forces. Such transactions typically happen between two businesses that are about the same size and which recognize advantages the other offers in terms of increasing sales, efficiencies, and capabilities. On the other hand, acquisitions occur when one company buys another company and folds it into its operations. Sometimes the purchase is friendly and sometimes it is hostile, depending on whether the company being acquired believes it is better off as an operating unit of a larger venture.

The end result of both processes is the same, but the relationship between the two companies differs based on whether a merger or acquisition occurred.

Why Companies Do Mergers and Acquisitions (M&A)?

When companies come together they can achieve cost efficiencies in the delivery of goods and services, sales and marketing, and the administration of the business. In a nutshell, they can take advantage of synergistic opportunities in the following four domains:

• Economies of scale – size matters.

  A large company placing large orders has the leverage of negotiating large discounts from its suppliers. This will affect every department of the company and may include everything from electricity bills to marketing and advertising.

• Staffing efficiencies

  While some mergers and acquisitions may lead to retrenchment, they can ensure better staff utilization, thus improving the company’s productivity. The new company is able to have a healthy-looking balance sheet with all the money saved due to enhanced efficiency in selected departments.

• Expanding the market reach

  Mergers and acquisitions is a very effective tool when a company wishes to penetrate new markets and grow its revenues. It expands the newly-formed company’s distribution and marketing channels while presenting new sales opportunities at the same time. Acquiring a company that already serves the geographical area you want to reach, is a far better option than trying to grab a foothold in that market through aggressive marketing.

• Accessing new technology

  Google acquired YouTube, or Facebook acquiring WhatsApp, are classic examples of this. Instead of spending millions of dollars on research and development, and that too in a field where you have already lost the first-mover advantage, large companies prefer to buy-out the proven technology. This way, they get to stay on top of technological developments and maintain their competitive edge.

Learn more about Singapore Business Mergers and Acquisitions at this InCorp Global blog.