Thanks to innovation and technology, competition in the business world has become stiffer and more widespread. As a result most small businesses find themselves pushed out of the market by their larger competitors. In such a world where might equals right and success depends on how fast one can adapt or react to the dynamic changes in the market, the size of the organization has become increasingly important.
The size of a business is determined by its markets share, number of employees, sales revenue and share capital and there are two main ways in which a company can expand its size; it can either grow organically or expand through mergers and acquisitions.
Organic expansion is as a result of the markets reaction to the business i.e. increased sales which often translates into increased revenue and expansion of operations.
Mergers & acquisitions on the other hand is expansion through absorbing or buying out of other businesses. When two companies merge they formally agree to join forces and become a larger business entity, however when acquisition occurs one company buys out another company.
As competition increases, respective market share for each business in a particular industry decreases. Unless you are dealing in the production of a unique product or service it is hard to maintain uninterrupted positive cash flows. Thus organic expansion is somewhat limited. Mergers & acquisitions on the other hand offer faster results and are perhaps more practical in that they come with a variety of practical benefits.
Although there are many benefits to be accrued through mergers & acquisitions, such as economies of scale, greater market share and a reduction in competition and thus risk; Bubnack and Company, Inc. knows the best possible strategies in these agreements. For example, in the first instance the unit cost of factors of production is significantly reduced as a result of an increase in quantities ordered; but in the second case an increase in the company’s market share means the business can make more money (and thus revenue) as they are selling more products than they were previously by joining forces.
Additional practical benefits can be realized like acquiring rival companies or merging efforts with similar businesses the competition the businesses faces is reduced and they might even acquire specialized labor from the merged or acquired company. In any scenario Bubnack and Company, Inc. will ensure the transaction is as smooth and profitable as possible. Give us a call today to get started.