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PT MARVEL
MERGERS & ACQUISITIONS
What is MERGERS AND ACQUISITIONS
When it comes to corporate finance, MERGERS AND ACQUISITIONS are transactions in which ownership of companies, other business organizations or their operating units is transferred or consolidated with other entities.
M&A involves the process of combining two companies into one with the aim of joining two or more businesses and thus achieving synergy - where the whole (new company) is greater than the sum of its parts (the two separate former entities).
Why is MERGERS AND ACQUISITIONS (M&A) important?
M&A is important because it makes it possible to create synergies in which the combined company is worth more than the two companies individually. As a result, synergies may be due to cost savings or higher revenues.
What are the 3 types of mergers?
horizontal mergers
In this role, companies are at the same stage and sectors merge to reduce costs, expand product offerings or reduce competition. It is natural that many of the largest mergers are horizontal to achieve economies of scale more easily. As an example, the $1.25 billion acquisition of the Overnite carrier allowed UPS, the world's largest carrier, to accelerate the expansion of its heavy delivery business, thereby expanding its product offerings.
In this merger, a company acquires another company in the same sector, commonly involved in an earlier or later stage of the production or sale process. Acquiring a raw material supplier, distribution company, or customer gives the acquiring company more control.
conglomerate mergers
A conglomerate merger brings companies together in unrelated businesses to reduce risk. Grouping companies whose products have different seasonal patterns or respond differently to business cycles can result in more stable sales. According to Philip Morris Company, now called Altria Group, it started in the tobacco industry, but it changed as far back as the 1960s with the acquisition of Miller Brewing Company. Company diversified into the food industry with subsequent purchases of General Foods, Kraft Foods and Nabisco, among others. Subsequently breaking up many businesses, current product categories include cigars, cigarettes, wines, smokeless tobacco such as Copenhagen and Skoal, e-steam products such as MarkTen.
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