Functions of Investment Banking: Merger and Acquisition (M&A)
📌 What is Merger & Acquisition (M&A)? | Explained with Examples
In the fast-moving world of business, companies are constantly evolving, growing, and reshaping their strategies to remain competitive. One of the most powerful ways they do this is through Merger and Acquisition (M&A). In this post, we’ll explore what M&A means, why companies opt for it, its types, advantages, disadvantages, and real-world examples.
🔍 What is a Merger?
A merger is a business strategy where two companies combine to form a single new company. It’s usually done between companies of similar size and strength to gain market share or reduce competition.
Example: In 1998, Daimler-Benz merged with Chrysler to form DaimlerChrysler.
🔍 What is an Acquisition?
An acquisition happens when one company buys another and takes control of it. This can be friendly or hostile, depending on agreement.
Example: Facebook acquired Instagram in 2012 for $1 billion.
🧩 Key Differences Between Merger & Acquisition
| Feature | Merger | Acquisition |
|---|---|---|
| Meaning | Two companies unite | One company buys another |
| New Entity | Yes | No |
| Power Balance | Equal or mutual | Buyer dominates |
| Name Change | Usually | May or may not |
🏷️ Types of Mergers & Acquisitions
- Horizontal Merger: Same industry (e.g., two telecom firms).
- Vertical Merger: Different production stages (e.g., manufacturer + supplier).
- Conglomerate Merger: Unrelated industries (e.g., tech + food company).
- Market Extension Merger: Companies in different regions.
- Product Extension Merger: Different but related products.
📈 Why Companies Choose M&A
- To increase market share
- To eliminate competition
- To enter new markets
- To gain technology or talent
- To achieve cost efficiency
⚖️ Advantages of M&A
- Economies of scale
- Enhanced brand value
- Diversification of risk
- Access to new capital and markets
- Faster business growth
⚠️ Disadvantages of M&A
- Cultural clashes
- Risk of layoffs
- Financial burden
- Regulatory approval delays
- Possible loss of identity
📊 Real-World M&A Examples
| Year | Acquirer | Acquired | Deal Value |
|---|---|---|---|
| 2016 | Microsoft | $26.2 Billion | |
| 2006 | YouTube | $1.65 Billion | |
| 2020 | Reliance Jio | Future Group Assets | ₹24,713 Crore |
| 2014 | $19 Billion |
🧠 Conclusion
Merger and Acquisition is a powerful strategy to boost business value, gain new markets, and achieve long-term growth. While M&A has its challenges, when executed right, it can unlock massive potential.
📣 About the Author
Aashim Banerjee is a finance educator and founder of Ashcons Unisers consultancy & marketing, sharing insights on finance, marketing, and business strategies. Follow for more such posts!
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Tags: Merger, Acquisition, Business Growth, Company Merger, Corporate Strategy, Investment, Aashim Banerjee, Ashcons Unisers
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