Mergers and Acquisitions as a Strategic Alternative

Mergers and acquisitions can be rationalized in three ways. Companies merge to achieve competitive integration, supply chain movement, and diversification. Competitive integration is done to increase revenue and take advantage of synergies. Supply chain movements help improve margins, lock up new innovations in the marketplace, and provide access to end customers in the supply chain. Diversification helps companies reduce their exposure to specific industries. The major risks of M&A are the inability to realize economies of scale from synergies, consummation of the transactions themselves, and lower interim productivity that ultimately result in weakened financial performance.

^[1]Antuilo Bomfirm and William R. Nelson, "Profits and Balance Sheets Developments at U.S. Commercial Banks", Federal Reserve Bulletin, Vol. 85, No. 6 (June 1999), pp. 369-395.

^[2]Merriam Webster's Collegiate Dictionary, 10th ed. (1999).

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Mergers and Acquisitions as a Strategic Alternative

Mergers and Acquisitions as a Strategic Alternative