The Covid-19 pandemic which lasted from early 2020 to 2022 provided a lot of experience for the business world. One of them is how merger and acquisition (M&A) practices play out during the pandemic and after. This issue was the main discussion in the guest lecture from Freddy Soejandy on Financial Management and Policy which took place at Amphitheater 2, MBA ITB Bandung, on Wednesday (4/10).
Merger refers to the consolidation of two companies into a single entity. This process is typically accomplished by offering shareholders of one company the securities of the acquiring company in exchange for their shares.
On the other hand, an acquisition is marked by one company taking control of another company, effectively becoming the new owner.
Mergers and acquisitions (M&A) can be categorized into several types. These include horizontal mergers, which involve combining companies within the same industry; vertical mergers, where companies at different stages of the supply chain integrate; and conglomerate mergers, which involve combining companies engaged in unrelated businesses.
Various motivations drive mergers. One of the most significant is the growth or diversification motive, where companies merge to enter new markets, expand their product portfolios, or capitalize on synergies. Additionally, mergers are executed to increase market share by eliminating competition, thereby securing dominance in the market.
Cost efficiency is another key driving factor. Mergers lead to economies of scale, reducing unit costs by leveraging shared resources and capabilities.
Mergers and acquisitions offer numerous benefits, such as expanding market presence, increasing economies of scale and scope, gaining access to new markets and distribution channels, and sharing risk and knowledge between the merging entities. However, in the wake of the complex challenges posed by the pandemic, business leaders must possess a deep understanding of financial strategies to navigate mergers and acquisitions successfully and achieve optimal results.
