Merger and Acquisition

Running head: MERGER AND ACQUISITION
Merger and Acquisition
Name of the Student
Name of the University
Author Note

MERGER AND ACQUISITION1
Duksaite, E. (2009). Why companies decide to participate in mergers and acquisition
transactions. Mokslas: Lietuvos Ateitis, 1(3), 21.
In this article, the authors discuss about the reasons for companies participating in merger
and acquisition transactions. The major motivating factor is growth. Mergers and
acquisitions allow company to expand their growth and reach wider markets than before.
This also happens in a shorter time span than the company expanding by itself. Other
important factors include synergy and diversification. However, these factors are a mere
extension of the growth motive that continues to be a major factor in the expansion of the
business. It also contains the perspective of both the buyer and the seller in a merger
transaction. The article suggests that there are two options available for an option to
grow. They are the internal/organic growth and the inorganic growth. The inorganic
growth occurs through mergers and acquisitions. In case of a company looking to grow in
its own industry, merger is the best option. Especially for companies looking to expand in
a short span of time. It is also helpful for companies looking to expand into new
geographical regions as it provides competitive advantage to the entities. The next reason
provided by the authors for entering merger and acquisition transactions is synergy. In
financial terms, synergy refers to the combination of entities becoming more powerful
than the individual entities do. They are the operating synergy and the financial synergy.
Operating energy states that an entity obtains both economies of scope and economies of
scale by entering into a merger. Financial synergy refers to the overall reduction in the
costs incurred by the company. It also provides tax benefits, access to intangible assets
and access to a new customer base to an entity.