A Brief History of the Financial Constructions Known as M&As

Mergers and acquisitions happen so often nowadays that most people don’t even keep track of it anymore. This is particularly true for consumers, who often don’t even remember what the brand or product name they want is. While some say this is bad for things like brand recognition, the reality is also that businesses have to evolve and grow if they want to remain competitive.

Business people working in a conference room.

In order to achieve that competitiveness, they have to combine in one of many ways. In very broad terms, this can be achieved through merger and acquisition services. However, it is important to have at least a basic level of understanding of these terms, and particularly the types of mergers and acquisitions. As such:

  1. Horizontal mergers, where two companies that make similar products or deliver similar services decide to join forces.
  2. Vertical mergers, where two companies that have business relationships (such as a manufacturer and a distributor) join forces.

Horizontal mergers are completely legal, but many people don’t like them. This is because they make it much more difficult for other firms to compete against them. In turn, this gives them an unfair market advantage and often means that they can charge whatever prices they want, to the detriment of their customers. It also takes an element of choice away from consumers, something that people don’t appreciate. Creating a monopoly, as such, is legal but not recommended, not in the least because it may drive all customers away.

Vertical mergers are more appreciated by consumers. For instance, a sausage roll company may decide to merge with a company that produces sausages. The two products will continue to be available, both singularly and as one. This means consumers continue to have the choice they need as no competition is eliminated. This is a much more welcomed financial construction.

For hundreds of years, companies have been engaged in mergers and acquisitions. However, they seem to be getting increasingly common nowadays. In the late 19th century, the first really big mergers started to happen, although even then it wasn’t a new concept. It is believed that the so-called ‘Great Merger Movement’ was directly linked to the Industrial Revolution. Since then, however, six further merger and acquisition waves have taken place. Generally speaking, these were quite peaceful and improved the standing of all companies involved. However, in the 1990s, there were quite a few ‘hostile takeovers’.

Today, the majority of mergers and acquisitions are between businesses in different countries. This is changing the way the world does business, with companies now having a bigger presence on international markets. Additionally, many businesses now function completely online, and this is also having an impact on how mergers and acquisitions are conducted. It is believed that we will soon enter the next wave of M&As, therefore, although it isn’t exactly clear yet what that wave will be and how it will affect the global economy. It is a case of wait and see, in other words.

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