The Impact of Merger and Acquisition


The Impact of Merger and Acquisition

Mergers and acquisition is the process of combining two companies into one with different forms. The terms mergers and acquisitions are often used interchangeably, although, in fact, they have slightly different meanings. In a merger, two companies of similar size combine to form a new single entity. On the other hand, the acquisition is the act of getting or receiving something or the item that was received from the other company. In other words, it is when one company takes over another company and establishes itself as the new owner. These activities have a great role in the company because they have a great impact not only on the management but also a great impact on the employees who worked in the company.


Possible impacts for mergers and acquisitions of different segments of the business are:

1. Impact on Shareholders

Shareholders within both companies receive an equal amount of shares for the new company. Since shareholders have the assets of both firms behind their investment, stock values may rise. Presumably, by combining operational costs, the new company’s overall expenses will drop and profits will rise. There are many benefits of mergers and acquisitions for both organizations.

  • Revenue may increase with the elimination of redundant costs.
  • Potential market share increases, either across geographic borders or through loyal consumers willing to look at new products developed as a result of the mergers or acquisitions.
  • Reduced competition can increase profit margins and spur innovation.
  • The companies gain access to new resources and human capital previously held by their competitor.
  • Brand awareness may increase.
  • Stock prices may rise as a result of the combined assets and reduced costs.
  • Incremental growth may come more easily as a result of the above benefits.

In the absence of unfavorable economic conditions, shareholders of the merged company usually experience favorable long-term performance and dividends.

2. Impact on the Employees

In spite of the inherent benefits, the impact of mergers and acquisitions on employees can be stressful. Managing the effect of mergers and acquisitions on employee performance can help business owners mitigate some of the inherent disadvantages in mergers and acquisitions.

Undoubtedly, the impact of mergers and acquisitions on employees is one of the riskiest factors when we explore the advantages and disadvantages of mergers and acquisitions. Poor employee management can crumble a company, no matter how many new assets it has acquired or how much money it’s saving as a result of the mergers or acquisitions.

Mergers and acquisitions may be one of the most stressful experiences employees have to face. Yet, it has huge long-term benefits of mergers and acquisitions for management, Shareholders, and for the company’s bottom line may outweigh the short-term challenges. That’s why you often hear all about mergers and acquisitions as a strategic way to grow a budding business.