The Main Benefits of Mergers and Acquisitions

A study of the most profitable franchises will reveal that they come from
companies that have grown at rates that their rivals failed to match. This isn’t
simply due to luck, but because these companies have understood and taken
advantage of acquisitions and mergers. If you’re interested in franchising, knowing
the benefits will be necessary as well.

Increased Value

The biggest benefit that mergers & acquisitions bring is increased value,
increased market share and better cost efficiency. Furthermore, M&As usually lead
to higher tax gains, reducing capital costs and generating more revenue. In
addition, the newly formed company can expect the shareholder value to increase
and be worth substantially more than the companies prior to the merging.

Second, company mergers often lead to increased productivity, and in many cases
that is one of the reasons why mergers take place. furthermore, the aforementioned
tax gains are realized when the company increases its market share. Although the
process is complex and oftentimes requires intensive negotiations and dealings,
both firms never lose sight of the main goal, and that is to increase profitability.

Surviving Tough Times

Acquisitions and mergers also happen as companies try to survive difficult times,
and during periods of economic difficulty, these M&As become more common.
For instance, if company A is suffering huge losses and market share, it might look
for a merger to help it recover. A larger company that’s looking for ways to expand
operations might be interested in buying a small company as it could serve their
purpose. If these two companies can work out a deal, then an M&A will result.
In this case both companies benefit from the deal. The small, struggling company
is saved from bankruptcy by the larger company, while the buyer gains additional
market share and reinforces their presence in the field.

Cost Efficiency

After the M&A the newly formed company isn’t just more valuable than the
previous one, but production is done on a bigger scale. Provided the process is
done properly, the cost per production is reduced significantly without any quality
compromise. This is possible because an M&A leads to economies of scale which
in turn leads to cost efficiency.

Finally, the newly formed company is in a better position to dominate the market
and increase their foothold. At the same time, the reduced production cost leads to
higher competitiveness and improved profitability. In other words, the benefits far
outweigh any complications that might arise.

If you’re trying to figure out the subway franchise cost and if it’s a good idea, you
may want to learn the basics of M&A first. Although you’re not exactly buying a
new company, knowing the ins and outs will help you with the day to day
management chores and duties.