At Sunbelt Central America, we are experts in mergers and acquisitions. As business advisers, we help our clients buy and sell private companies, aligning the interests of all parties to achieve a mutual agreement and a satisfactory transaction. Read on for five common questions about business mergers and acquisitions.
1. What does the term mergers and acquisitions mean?
In the business world, the term "mergers and acquisitions" (also known as M&A) generally refers to the consolidation of companies or associated assets. The term can encompass many different types of businesses: consolidations, acquisition / purchase of companies, sale of companies, divestitures, among others. In most cases, two commercial companies are involved.
2. What is the difference between a merger and an acquisition?
A merger is the combination of two separate companies to form a new institution, while an acquisition is the absorption of one company by another, without the creation of a new business entity.
3. What are the different types of mergers?
There are five common types of mergers:
Market Extension Merger: A merger between two businesses dealing with the same products, but in separate businesses. A market extension merger guarantees access to a greater market share and customer base for both merged companies.
Product Extension Merger: A merger between two companies dealing with related products and in the same market. A product extension merger allows the merged companies to bundle their respective products, ensuring a higher profit margin.
Conglomerate Merger: A merger between companies that engage in unrelated business activities. There are two types of conglomerate mergers: pure and mixed. The pure consists of two companies with no related businesses. The mix includes two companies hoping to obtain product extension or market extension mergers.
Vertical merger: A merger between two companies that produce different products in the same supply chain. These companies may not compete with each other, but they merge to increase synergy and efficiency.
Horizontal merger: A merger between two companies operating in the same market. A horizontal merger is the consolidation of competitors, with the aim of achieving greater market share.
4. Why do companies acquire other companies?
Acquisitions are typically introduced by larger companies looking to buy smaller companies with which they compete directly. Acquisitions can be viewed as an investment and result in increased market share for the acquiring company.
5. How can business advisory firms help with mergers and acquisitions?
An expert M&A Advisor helps entrepreneurs buy and sell businesses. Mergers and acquisitions are very complex and it may be necessary to enlist the expertise of an experienced business advisory firm, such as Sunbelt, to help with the process.
Source: Sunbelt Business Brokers