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Chapter 14. Mergers and Acquisitions (M&... > Why Do Mergers and Acquisitions Occu...

Why Do Mergers and Acquisitions Occur?

The M&A wave of recent years has been driven by technological changes and market conditions which forced companies to either develop technological solutions by themselves or, alternatively, buy or merge with companies which could provide them with the technological market edge or another relative advantage, such as a managerial advantage; an advantage of scale in production capacity, marketing or cost structure; a complement to their line of products or services, and so forth.

From the perspective of the acquired, merging, or selling party, the decision to make the move is often driven by the recognition that the company's operating results could improve if the company were part of a larger entity, whether in the form of an association of similar-sized companies or by being incorporated into a larger entity. In other cases, the decision to sell a business division results from the recognition that the division does not fit in well with the company's activity strategically or, alternatively, that the company has no competitive edge in its management of such division. Another main consideration is that of the investors or entrepreneurs, for whom the acquisition typically provides an opportunity to liquidate their investment by receiving cash or shares in a publicly listed company.


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