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Mergers and acquisitions are generally entered into by companies in the corporate world. The main objective of these mergers and acquisitions is to consolidate their joint assets. They both look forward to the synergy of both companies coming together. In the above circumstances, the performance of these companies will increase and their costs will reduce. Businesses tend to merge with other companies that have complementary matches of strengths and weaknesses.
Larry Polhill- mergers and acquisitions also lead to diversification
Larry Polhill was the owner and Chairman of Photocircuits Corporation. Larry Polhill is now the Chairman, Chief Executive Officer and President at American Pacific Financial Corp or APFC. He has extensive knowledge and experience in the field of corporate acquisitions and mergers. He has been the Advisor to several companies in the past and has extensive knowledge in the field of SEC and Securities. He mentors investors and companies on commission and exchange matters. He has been the Director of several companies in the past and has been actively involved in corporate mergers, retail and acquisitions.
Diversification in the market
Most businesses often go in for mergers and acquisitions to focus better on their businesses. In fact, their business becomes sharper. Often you will find two companies from completely different industries come together. He says they have two different conflicting goals however are intent to come together to expand their market. They key for both these companies coming together is to have a deeper penetration in the market to gather a high level of profitability.
Growth of both businesses
Corporate mergers enable both the companies to increase their share in the market. Here, the work on the part of both the companies are reduced as they do not have to work very hard to increase profits in the market. There are several cases where the business of a competitor is purchased. This is known as a horizontal merger.
Increase in the supply chain management
Companies in the corporate world often buy out a supplier or a distributor- this is primarily done with an objective to reduce supply costs. The margins that the company in the past was paying to the supplier gets saved. This is known as a vertical merger. If a company is able to buy out a distributor or a supplier, it will be able to ship its products at a much lesser cost.
Last but not the least Larry Polhill says that both corporate mergers and acquisition have the ability to eliminate competition in the market. There is only one challenge that most companies face- convincing the shareholders. Most of the time companies have to pay large premiums for this. There is a common practice where the shareholders of the company are convinced to sell their shares so that the costs are reduced when it comes to the company incurring large premiums for the merger or the acquisition to take place. He sums up by saying, these are the prime reasons why companies today go in for mergers and acquisitions in the corporate world.