Introduction to Financial Analysis Model
Financial analysis is an organized procedure which analyses various financial statements of the company, budget, and other transactions to evaluate the performance of the company. This process helps the managers to manage the future business by making proper decisions from the past business of the company. Financial analysis is a useful model for investors to gain knowledge about the best investing chances. It is the model which helps the organization for evaluating the upcoming or new trends, setting the financial policies, estimating the long run business plans, and getting different projects and other organizations for the investment process (Alshowishin, 2021).
The company’s financial analysts conduct all the financial processes. The financial analysis model will perform both the corporate and investment finance process. Calculating the financial ratios of the financial data compared to other companies or the company’s past data.This report is to brief about the process ofmerger and acquisitions models, discuss the key benefits and drawbacks of the model to the business and make recommendations for implementing the process.
Introduction and Process ofMergers & Acquisition Model
Mergers and Acquisition refers to association of the companies or the main resources of the business based on their financial transactions of the companies. The main purpose of a merger is combining a company with other company to from a new company and acquires its major resources. Acquisition refers to purchasing of another company and acquiring the legal rights to it. There is a need to follow mergers and acquisitions processes in different areas. The M&A process includes several steps. Before developing the acquisition strategy every acquirer should have a proper knowledge of the process of acquisition.
measures to estimate the target company
The second step is to find out the main reasons to identify the particular target company. The analysts should use their identified measures to estimate the target company which is potential. After estimating the analysts will meet the targeted companies directly, which helps to know more about the company and its performance (Weller, 2019). This helps the analysts to choose the best potential company which suits their requirements.
The analysts gather the information related to the financial performance of the company which helps to evaluate the past financial state of the company. This is helpful to know whether to merge witha particular company or not. After gathering all the requirements, the analysts fix a reasonable offer so that the two companies will be able to negotiate theoffer in more efficient way. The next process is due diligence, which will be started after the acceptance of the offer. Due diligence is the process of confirming or correcting the analysis of the analysts by creating a detailed investigation of all the aspects of the targeted company.
After the due diligence function is completed stating no problems in the process then the next process is making a final decision in between both companies for the type of purchase argument (Parab & L, 2022). The next process is strategic financialacquisition which means the analyst has already gone through the financial options before, but the real financing comes after the purchase of the company or after signing the agreement of the sale. The last step is closing the process of acquisition deals and the management teams of the target company, and the analyststarts the process of merging the two organizations.
Key Benefits ofMergers & Acquisition Model to the Business
There are several benefits of using the mergers and acquisitions model in business. The major benefit of mergers and acquisitions is it will bring a large market share to a company as one company merges withanothercompany, which will help to raise its revenue and share of the market. The best benefit of using mergers and acquisitions isfinding ways to grow faster by entering the new markets and exploring over it forgetting back the previous customers. Exploring internationally and expanding the business might be a difficult task but M&A helps in acquiring already existing business with the same market. Mergers and acquisitions help in increased high profits with low cost. Operating the large-scaleindustries will increase revenue and decreases the costs. As the operations of the company grow well then, the stocks also increase rapidly which helps in combining with the larger companies (Patel, 2024).
Merging with the companies of other countries will be beneficial tofaster growth andhelp in identifying new talents. If the mergers and acquisitions are completed, then many other country governmentsoffer the tax reductions options. Another benefit of acquisitions is bringing the services, products, and other tools under the single company.It might be difficult sometimes to identify which company leads in the future or which company falls but with the help of merger and acquisition analysis it is easy to identify the future performances of the other companies. Business means survival and fitting to the changing conditions of the market, but it might be a challenging task sometimes. During such kinds of challenges mergers and acquisitions also increase, which helps an organization to stand in critical situations. Mergers and acquisitions helpto make the person the leader of the organization in their industry byestablishing relations with other companies and merging with them.
Key Drawbacks of Implementing Mergers & Acquisition Model for Business
As mergers and acquisitions help in the business but this process also has some disadvantages. The process of mergers and acquisitions are time taking as there is need of more research of another company and negotiating with the companies must be done before signing the agreements. This shows how the process is distracted from the everyday activities of the company. After completion of merging the companies there may be loss of some common jobs which might be a burden and not necessary to the company (Bougnague, 2023). Some companies place employees in other locations after training them, but this isn’t always the case. In such cases there might be a layoff in the company. Another drawback of mergers and acquisitions is losing efficient staff because if the employees feel there may be a riskto their jobs, they might look for another opportunity.
coordinate with the new staff
Also, if the staff does not like the changes. Made after the merging of the organizations, they may also quit the company and choose other options. Employees might be not able to adapt to the new cultures of the company. And coordinate with the new staff this also might be a drawback of merging and acquisitions. Identifying the actual costs of a company might be a challenging task identifying the hidden costs while purchasing the company will have a crucial role in losing the jobs of the employees.
If the due diligence check is not properly completed in merging with anothercompany, it may raise some unexpected costs. The unexpected costs also might be seen in some specific areas. Like repairing machinery or any other equipment in the company. After merging with another company, the way of performing the tasks might be different,which results in raising the problem. We need to update the due diligence analysis about the performance and business operations at the beginning.
Recommendations
The main reason for every company involving the mergers and acquisitions is it enhances the company’s value. There are some of the suggestions that helps to maintain a successful merger and acquisition plan. Maintaining the proper strategic plan helps in protecting the company from the failure of mergers and acquisitions (Frrderikseen, 2024). Before purchasing any other company, the analysts need to have a planned strategy. Which helps them to know why they want to buy a company. And what will be the benefit after merging with the company. Setting up the right merger and acquisition search. Criteria helps to identify main targets like location, profits, efficient customers, and others.
Using the identified search criteria to find out. Which company might satisfy the goals and requirements the acquirer is looking for. After selecting the companies, it is better to begin the planning. Process by meeting them directly and knowing more about that company. After finding the right company it is better. To have all financial information of the company to analyze more about that company. Having the proper and clear information about the particular company will help to start the negotiations for purchasing the company.
identify the risks and take efficient steps
After finding the expected company with the expected criteria. The next step is to create an offer which will be beneficial for both of the companies. Putting all the experienced leaders and advisors in the team will be helpful.They identify the risks and take efficient steps to solve them. Before merging both companies there should be a proper plan. For culture fit in the company which means motivating or pushback the employees. Of the organization for not having any culture clashes. Being trust worthy in the hole M&A process is an efficient task. Because if the employees feel any discomfort with the new merging company they may quit the job. Communicating with the employees will help in the time for merging with other company. answering the employees’ questions honestly will help them. As well as the management to proceed with success.
Conclusion
The merger and acquisitions process are an efficient and crucial part of every business. Mergers and acquisitions are the important strategic. Business plans which help to offer the companies. A chance to have a proper strategic plan and succeed in their business. This process might be a challenging task. But the benefits of the process will help the organizations and their stock market range. As discussed, mergers and acquisitions provide various benefits which helpevery organization to merge with other organizations in a successful way. The major result of the merger and acquisition process is having an increase in growth of thecompany and wealth also.
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