The principal benefits from mergers and acquisitions can be listed as increased value generation, increase in cost efficiency and increase in market share.
Benefits of Mergers and Acquisitions are the main reasons for which the companies enter into these deals. Mergers and Acquisitions may generate tax gains, can increase revenue and can reduce the cost of capital. The main benefits of Mergers and Acquisitions are the following: * Greater Value Generation
Mergers and acquisitions often lead to an increased value generation for the company. It is expected that the shareholder value of a firm after mergers or acquisitions would be greater than the sum of the shareholder values of the parent companies. Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of economies of scale. * Tax Gains and revenue
The company also leads to tax gains and can even lead to a revenue enhancement through market share gain. The CFC Companies go for Mergers and Acquisition from the idea that, the joint company will be able to generate more value than the separate firms. MMD stock was traded caused it to sell for 11 to 12 times earnings, whereas stock of some competitors were in the price range of 15 to 20 time earnings. When a company buys out another, it expects that the newly generated shareholder value will be higher than the value of the sum of the shares of the two separate companies. * Gaining Cost Efficiency
When two companies come together by merger or acquisition, the joint company benefits in terms of cost efficiency. A merger or acquisition is able to create economies of scale which in turn generates cost efficiency. As the two firms form a new and bigger company, the...