In this emerging era of growth in the economy all business endeavour to grow and expand their existing operations. The two ways in which a business can grow is through the internal growth and expansion or through external expansion. A business can grow internally with the use of new technology, acquiring assets, advanced resources and techniques, formulating proper strategy etc. Though there are various other ways a business can grow internally, however it takes time to obtain results. Therefore every business planning to grow in this competitive environment shall opt for external expansion techniques such as takeovers, mergers, acquisition, consolidations etc.
Different transactions involved in Merger and Acquisition
Merger and Acquisition is the basic term which refers to the consolidation of assets or companies. It consists of different types of transactions such as mergers, acquisition, consolidations, purchase of assets and management acquisition etc. The combined term merger and acquisition consists of number of different transactions such as-
- Merger – It is the mutual agreement between two companies to form a new company. In case of merger the company which gets acquired, ceases to exist and becomes the part of new company. For eg A+B=A (here A is the continuing company and B is the merged company).
- Acquisition- Acquisition occurs when one entity purchases the business of another company and the same old business continues as of the acquirer company.
- Consolidation- Consolidation occurs when two or more corporations jointly form a new corporation and both the original corporation ceases to exist. For eg. A+B=C (Here A and B consolidate to form C).
- Management Acquisition-In management acquisition the executive of the company purchases the major stake in the other company.
- Purchase of Assets- In acquisition of assets one company acquires the assets of the other company. The acquisition of asset normally occurs during the bidding of the assets of the bankrupt company.
Mergers & Acquisitions Consulting-A driving force for IT Consulting Industry
The need of Merger and Acquisition has been felt by the emerging business who wants to expand their existing operations by realizing the synergy or financial benefits between two enterprises. More than 60% of the investment made by the business in merger and acquisition fails due to ineffective and improper decision making therefore a need has been felt for a proper strategy consulting. Since merger and acquisition plays a very critical role in the success of the organization therefore it let to the great demand for the IT consulting services. If such growth continues it is expected that the global IT consulting market will be expected to grow by CAGR 4% till 2020.