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M&A plays a significant part in the corporate world. Online M&A transactions have become more common. In the event of a merger two companies will either merge to form a single entity (merger) or they purchase the other company from its shareholders and take over its operations (acquisition). Both types of M&As are accompanied by significant financial implications. Companies engage in M&A to take advantage of synergies and economies of scale, which allows them to save money on resources that are not needed such as branch and regional manufacturing facilities, offices research projects, and the like. Savings from cost cuts are credited directly to the bottom-line and are referred to as an acquisition that is an accretive.
Other motives for M&A are competitive and strategic, such as gaining access to new technology or capability, or expanding into new markets. Cisco recently bought Purple the direct-to-consumer mattress retailer, for $1.1 billion. Such deals are generally more attractive to investors than a typical equity deal, which entails the investor acquiring shares in the acquiring company and holding them for a long period of time.
M&A could be affected in the short term by the coronavirus outbreak that is currently in progress. Buyers must weigh the benefits and risk of a transaction against the risks and costs and their internal arguments will have to be more robust. It could take longer to obtain third-party approvals, including from customers and intellectual property licensing companies. M&A valuations are more difficult to determine because of the coronavirus outbreak, and the popular saying “getting everyone together in the same room” is not feasible this moment.