The Future of Online Merger and Acquisition Transactions

M&A plays a significant part in corporate life. Online M&A transactions have become more frequent. In a merger or acquisition two companies will either merge into one entity (merger) or buy the other entity from its current shareholders and take over its operations (acquisition). Both types of M&As have significant financial consequences. M&As are undertaken by companies to make use of economies of scale and synergies. This allows them to cut costs in wasteful resources, such as manufacturing plants, branch and regional offices research projects, branch offices and other such things. The savings resulting from cost reductions can be directly credited to the bottom line and are termed an acquisition that is profitable.

Other motives for M&A include competitive and strategic reasons that include accessing new technology or capability, or expanding into an entirely new market. The mattress retailer that sells direct to consumers Purple for instance was recently acquired Cisco for $1.1 billion. These deals are more appealing to investors than the typical equity deal where investors purchase shares of the company acquiring them and then holds them for a lengthy duration.

Since the coronavirus outbreak is active, M&A activity may be reduced in the short term. Buyers will have to weigh the benefits of a deal in comparison to the risks and costs, while internal justifications for the deal are likely to be more robust. Third-party consents will be difficult to obtain, for example from customers or intellectual property licensors. M&A valuations are more difficult to determine due to the coronavirus epidemic, and the common phrase “getting everyone together in a room” is not feasible right now.