Mergers and Aquisitions

At Indiana Business Advisors, we take mergers and acquisitions seriously. As brokers, we help our clients buy and sell private businesses, aligning the interests of all parties for mutual agreement and satisfaction. Read on for five frequently-asked questions about business mergers and acquisitions.

1. What do you mean by mergers and acquisitions?

Within the business industry, the term “mergers and acquisitions” (also known as M&A) generally refers to the consolidation of companies or associated assets. Above all, the term can encompass many different kinds of business deals–consolidations, offers, sales of majority assets, etc. However, in all cases, two business firms are involved.

Mergers and acquisitions are also frequently the name of the department at the brokerage firm that handles the mergers and acquisitions deals.

2. What is the difference between a merger and an acquisition?

A merger is the combination of two separate companies to form a new institution, while an acquisition is the absorption of one company by another, without the creation of a brand new business entity.

3. What are the different types of mergers?

There are five common types of mergers:

Market Extension Merger

A merger between two businesses that deal in the same products but in separate trades. A market extension merger also ensures access to a bigger market share and client base for both merging companies.

Product Extension Merger

A merger between two firms that deal in related products and in the same market. A product extension merger allows merging companies to group their respective products together, thus ensuring a higher earnings profit.

Conglomerate Merger

A merger between companies that are involved in unrelated business activities. There are two kinds of conglomerate mergers; pure, which comprises two companies with no related business, and mixed, which includes two companies hoping to gain product extension or market extension mergers.

Vertical Merger

A merger between two businesses that produce different products in the same supply chain. For instance, these companies may not compete with each other, but they merge to increase synergy and efficiency.

Horizontal Merger

A merger between two companies that operate in the same market. A horizontal merger is the consolidation of competitors, which subsequently secures higher potential gains in market share.

4. Why do businesses acquire other businesses?

Usually, acquisitions are introduced by larger companies looking to buy smaller companies with which they are in direct competition. For instance, acquisitions can be seen as an investment and result in a larger market share for the acquiring company.

5. How can business brokerage firms assist in mergers and acquisitions?

The business brokerage industry helps individuals buy and sell businesses. Mergers and acquisitions are highly complex, and therefore it may be necessary to enlist the expertise of an experienced business brokerage firm, like Sunbelt, to assist in the process. Also, most mergers and acquisitions often require authorization from a governmental organization.

Source: Sunbelt Network

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Edwin Mysogland, CVA, CEPA, CMEA
Managing Partner, Indiana Business Advisors

Indiana Business Advisors is the top business brokerage firm in the state of Indiana and one of the largest in the Midwest. Whether you are looking to a buy a business or sell a business, Indiana Business Advisors has the expertise and experience to get the deal completed. With over 40 years of history and 2200 businesses sold all over the United States, our team will work diligently to achieve your professional and personal goals.