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There are many companies which have been established to produce goods and services that are in high demand. The market has been very competitive because most products have close substitutes and have different features which buyers look at. This is why some firms have opted to join hands to produce similar products. The M&A have been effective in promoting competition and increase in the quality of goods produced.
Firms have many reasons that drive them to merge up with other competitors in the market. One reason why a merger may be formed is when the firms want to expend their capital base. In this case, the joint venture allows all the shareholders who had contributed to the parent companies to give their support. More funds are therefore collected helping the firms to initiate new investment decisions.
Joint companies are able to enjoy a bigger market share in a market that is highly competitive. When firms join to produce a given products, a firm whose products were initial registering low sales are branded with that of a known firm. This strategy has been found to improve the sales by a large percentage. Customers will continue purchasing the known brand thus the whole firm will have more returns in the long run.
When two companies join up to produce a particular product, the total cost per unit is reduced. The economies of scale are lower since production is done on a large scale and the technology used is similar. This enables more production and the cost is maintained at a level where maximum profits are reaped. Firms are therefore able to enjoy better profits in the long run and short run stages.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Merging is very effective in sharing of skills and technology which is very efficient. Companies have different technologies which are employed in the production process. Managers can therefore agree on one method which is effective in cutting down the expenses involved and maximize the revenues. No costs are incurred in this process since all decisions are agreed before implementing.
Mergers and acquisitions enjoy the ability to fix their own selling prices. The management is able to calculate the costs involved in producing a given amount of output. The revenue raised is as well estimated. This helps in fixing the selling prices which buyers will be willing to pay. The agreement helps in keeping the loyal customers.
Over the years, merging has been known to benefit the company itself. Employees also stand a chance of gaining from this kind of decision. This is where some are moved to higher ranks of management to the new business entity. In some cases, the employees get a reward through better pay which improves their welfare.
Firms have many reasons that drive them to merge up with other competitors in the market. One reason why a merger may be formed is when the firms want to expend their capital base. In this case, the joint venture allows all the shareholders who had contributed to the parent companies to give their support. More funds are therefore collected helping the firms to initiate new investment decisions.
Joint companies are able to enjoy a bigger market share in a market that is highly competitive. When firms join to produce a given products, a firm whose products were initial registering low sales are branded with that of a known firm. This strategy has been found to improve the sales by a large percentage. Customers will continue purchasing the known brand thus the whole firm will have more returns in the long run.
When two companies join up to produce a particular product, the total cost per unit is reduced. The economies of scale are lower since production is done on a large scale and the technology used is similar. This enables more production and the cost is maintained at a level where maximum profits are reaped. Firms are therefore able to enjoy better profits in the long run and short run stages.
Mergers and acquisition are recommendable because the firms will enjoy tax gains. The tax applicable to a firm is usually set on the total earning earned during a given year. The amount has been found to be slightly lower as compared to the one charged on two or more separate firms which operate independently. The dividends payable to shareholders are taxed at a lower amount hence they enjoy better returns.
Merging is very effective in sharing of skills and technology which is very efficient. Companies have different technologies which are employed in the production process. Managers can therefore agree on one method which is effective in cutting down the expenses involved and maximize the revenues. No costs are incurred in this process since all decisions are agreed before implementing.
Mergers and acquisitions enjoy the ability to fix their own selling prices. The management is able to calculate the costs involved in producing a given amount of output. The revenue raised is as well estimated. This helps in fixing the selling prices which buyers will be willing to pay. The agreement helps in keeping the loyal customers.
Over the years, merging has been known to benefit the company itself. Employees also stand a chance of gaining from this kind of decision. This is where some are moved to higher ranks of management to the new business entity. In some cases, the employees get a reward through better pay which improves their welfare.
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