Merger and acquisition activity is one of the most crucial business transactions that enable investing firms to consolidate their position in a country’s market and enjoy long-term profitability.
Due to rapid foreign investment in the country, India in the contemporary time is witnessing rapid growth in M&A transactions. IBEF states that in 2020, India, along with the USA, accounted for a total of 31% of the cross-border transactions and dominated the inbound and outbound M&A segments. Merger and acquisition companies in India played a great role in this transaction and simplified the complex legal and regulatory framework to reduce investment risks.
Types of Merger and Acquisition
Before delving into the types, let us understand what is merger and acquisition first.
Merger and acquisition is an act of consolidating a company or its assets to achieve target business growth and objectives. Though both these terms are used alternatively, there is a major difference. Merger refers to the act of combining forces of two companies such that both come to exist as an entirely new corporate entity. On the other hand, acquisition refers to buying all the shares of an existing firm by some other organization such that it comes to have complete authority over it.
Discussed below are the types of M&A:
Horizontal: Collaboration of two firms that have the same customer base and same supply chain.
Vertical: Coming together of two organizations that offer different products and services.
Concentric: Joining of two firms that belong to separate industries but have the same customer base.
Conglomerate: The collaboration of two companies that belong to two different industries and have distinct customer bases.
Choosing the right M&A type can prove increasingly difficult for foreign organizations willing to invest in India because of the complicated legal and market structures. Hence, assistance from a business consulting firm in India becomes imperative.
Importance of Merger and Acquisition
- M&A helps to diversify product and service offerings and improve the customer base and avoid significant losses.
- One of the most important benefits of M&A activity is to reduce market competition.
- M&A also helps unlock synergies and ensure higher revenues.
- Merging firms gain stronger market power due to the increased market share.
However, these advantages can be enjoyed only with the proper application of all the stages of M&A, which involves shortlisting targets, drafting deals, undertaking negotiations, performing due diligence, and framing appropriate post-integration initiatives. A top merger and acquisition company in India like Tecnova can help to strategize this process with detailed insights into the market and expert understanding, and therefore, ensure foreign organizations can achieve fair deals and market opportunities.
Tecnova is a leading Best India business consulting firm. With over 35 years of experience, 1400 clients, and 21 offices globally, Tecnova successfully formulates the best India-centric market-entry strategies through a detailed market analysis and partner research that helps reduce investment risks and secure profitable cross-border deals.