August 27th, 2019

Mergers & Acquisitions

In the arena of business finance, mergers and acquisitions involve the management and strategy of purchasing or joining with other companies. Acquisition is one company taken over by another, and mergers are the combination of two companies to form one. Both are used to expand a company's reach by creating shareholder value or gaining market shares.

Contact Bovell Financial today and find out if your investments can be combined to create a more efficient business model through mergers and acquisitions.


What's the Difference Between Mergers & Acquisitions?

Although the term “mergers and acquisitions” is often used to describe various restructuring strategies, the two words refer to different business activities. Acquisitions occur when one company purchases another, eliminating them as an independent entity. In certain situations, these activities can appear hostile, so they are called mergers to get rid of any negative connotations. A true merger is when two equal companies decide to join resources and interests and form a single entity under one corporate name.
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Bovell Financial provides support services for merger and acquisition transactions including:

• Evaluating and addressing finance issues
• Risk management
• Business valuations
• Due diligence for operations, cash flow management, and accounting
• Transaction structuring for profitability and competitiveness
• Post-transaction activities


Types of Mergers

Mergers can be structured in different ways, depending on the relationship between the companies involved.
Horizontal Merger: Both companies involved in the merger are based in the same industry and sell similar products or services. They may be competitors, so the idea is to alter this balance so together they increase the market share and avoid challenging each other.


Vertical Merger: The companies are still in the same industry, but their products or services occupy different stages in the supply chain. As they merge, they capture more of the market, cut cost and inefficiencies, and keep the supply flow steady.


Concentric Mergers: This is between two companies in different industries and designed to improve each company's effectiveness in different areas and markets.


Market-Extension Merger: Usually occurs between two companies that offer the same products or services but in different markets. By combining resources, they grow their base and target market.


Product-Extension Merger: The companies sell related products or services in the same market and can gain access to more consumers by grouping their offerings. They use similar supply chains, and processes, and their products complement each other.


Benefits of Mergers & Acquisitions

The main benefits of most restructuring actions is an increase in cost efficiency, value generation, and market shares. As companies integrate to form bigger organizations, the output of productions rises and increases the opportunity for lowering the cost per unit in production, creating value that helps sell products and services to customers. With better cost efficiency, the company becomes more competitive, driving up market shares. Higher stock prices ensure that the company will have the investment capital they need to fund future operations.