Mergers and Acquisitions: A New Perspective
The nature of mergers and acquisition activity has drastically changed over the past few years. Earlier, most of the mergers and acquisitions happened because companies wanted to do horizontal or vertical integration. They either wanted to team up with their competitors and enjoy economies of scale, or they wanted to team up with their suppliers and control the entire supply chain.
However, of late, technology has changed everything. So much so that the motto and reasoning behind mergers and acquisitions have also changed completely. For instance, in most of the M&As which are happening in the retail sector, brick and mortar companies are not buying other brick and mortar companies. The trend is that a well-established but declining brick and mortar retailer is buying an online e-commerce company.
Similarly, in the United States, chains of pharmacy stores are buying out health insurance companies. The reality is that businesses are no longer stable. Instead, they continuously change. Therefore whenever an established player finds itself lagging in some space, it used mergers and acquisitions to become competitive. Mergers and acquisitions are no longer strengthening the underlying core business. Instead, they are a mechanism to ensure that the company does not get left behind as rapidly changing technology changes the marketplace.
Some of the major reasons behind modern mergers and acquisitions have been listed in this article.
The bottom line is that the mergers and acquisitions game has changed drastically. The targets, reasons as well as the amount paid for the acquisitions are quite different than what they used to be a couple of decades ago.
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