An Eagle Eye View of Mergers and Acquisitions: A recipe for venture expansion

Abstract

In today’s global, competitive environment, mergers and acquisitions are sometimes the only means for long-term survival and growth of firms. The underlying principle behind M&A is simply 2+2=5, when we merge two companies; the synergy produces the additional value of 5. It is imperative that everyone involved in the process has a detail understanding of how the process works. An appropriate valuation method must be adopted to ascertain the worth of the companies in order to know whether the deal will be beneficial for the business concern. Merger and Acquisition especially in the banking sector is now a global phenomenon, the last few years has witnessed the creation of the world’s banking groups through M & A. All over the world and given the internationalization of finance, size has become an important ingredient for success in the globalizing world. The option of consolidation is predicated on the relationship between the two banks that are merging, the benefits accruing there-from involves creation of synergies and economies of scale, expanding operations and cutting costs. However, to ensure that the synergy envisage is fully harnessed, and to mitigate post-consolidation conflicts, adequate steps should be taken to train and retrain the staff of all the banks that have scaled the capitalization huddle while the regulatory environment has to be tightened to close all the loopholes that could come up as a result of the increased size of the firms in the industry.