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STATUTORY AUDITOR AT LUXEMBOURG en fr it lu hbr 

Merger and acquisition

merger and acquisition companiesMerger and acquisition are a tool used by companies with the aim of increasing business activity and increasing profits. One then talks about external growth contrary to organic growth (or internal growth) achieved through increase in turnover for the same group of companies.

The benefits of a merger-acquisition

Deciding on a company partnership or a purchase of assets can be related to different factors, often multiple, inter alia:

  • Economy of scale. By consolidating the striking force of two companies it makes it possible to buy cheaper thanks to discounts on volume. In the same way, the sum of the two parts makes it possible to coordinate tariff regulations and obtain the cheapest. Lastly, the doubling-up of production equipment, property assets and human resources are often identified.
  • Saving in vertical integration. Having a greater share of the production line makes it possible to better control beforehand access to raw materials or for the end-user further down the line and thus in particular to monitor the relevant margins.
  • Synergies of revenue. For example, a company may indeed be very well established in certain markets where it has a powerful distribution network. The purchase of a competitor will enable it to sell new products where the competitor did not have a sufficient sales force.
  • Tax reasons. A company with important tax credits is an interesting target for a highly profitable company. By adding the two parts, the buyer will pay less tax on these profits.
  • To reduce competition. Less competitors means less competition on prices and thus promises better turnover, at least in the medium term.
  • To monitor additional resources.
  • Use of its funds. When companies are active in mature and profitable markets but in which there exist few opportunities for development and investment, surplus funds may be used to buy new businesses rather than giving these funds to shareholders through dividends or the purchase of shares.
  • To eliminate inefficiency. It does so by consolidating the best practices of each part.

ABROAD offers you its expertise in Merger & Acquisition operations, in particular when they fall within an international environment.

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