Competition is a typical phenomenon in business, where two or more organizations compete for a limited market. However, some businesses are usually more successful than others as a result of their different strategies, which differentiate them from the rest of the competition. Some of the strategies for success are combination or merging, where two or more businesses become one entity.
There is a plethora of reasons why a company would acquire or merge with other businesses. Among the most common reason is the increased potential for the business’ growth. When a particular company acquires and merges with another, it has the chance of directly inheriting the market share, thus growing its market in the process (Palmer, 2019). This assumes that the buyer is absorbing one of the primary competitors and thus incrementing its market power and consequently increasing its revenues. Furthermore, the diversification of its business provides a company with a competitive advantage.
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Another reason is that mergers and acquisitions are cost-effective. They can decrease the costs that are associated with the development of business activities. The process of acquisition can also increment the supply-chain pricing power of the business, and the restructuring process associated with the merger and acquisition can aid in eliminating potential competitors as it acts as a differentiating factor.
Among the most prominent mergers and acquisitions is one where Disney acquired Pixar and Marvel. Walt Disney acquired Pixar in 2006 for $7.4 billion, and later on, it went to acquire Marvel Entertainment for $4 billion. These acquisitions are hailed as among the biggest mergers and acquisitions because of its success. One of the main reasons why Disney undertook these acquisitions were so that they can increase their revenue and market shares as both Pixar and Marvel were direct competitors. Besides, Disney was capable of leveraging Pixar’s more advanced technology, thus creating more value for the company.
References
Palmer, B. (2019). Why Do Companies Merge with or Acquire Other Companies? Retrieved 24 November 2020, from https://www.investopedia.com/ask/answers/why-do-companies-merge-or-acquire-other-companies/
