The Future of Online Merger and Acquisition Transactions

M&A is a crucial part of corporate life, and online M&A transactions are growing in frequency. In a merger, two companies will merge to form a single entity (merger), or they may purchase the other company from its shareholders and take over its operations (acquisition). Both types of M&As are associated with significant financial implications. Businesses engage in M&A to benefit from synergies and economies of scale which allow them to reduce the cost of redundant resources like regional and branch manufacturing facilities, offices, research projects and the like. Savings from cost cuts are credited directly to the bottom-line and are termed a transaction that is accruing.

Other reasons for M&A are strategic and competitive like gaining access to new technology or capability or expanding into new markets. The mattress retailer that sells direct to consumers Purple, for example, was recently acquired by Cisco for $1.1 billion. These deals are typically more appealing to investors than a typical equity deal, which involves the investor buying shares in the acquiring company and owning them for the long term.

M&A may be affected in the short term by the ongoing coronavirus outbreak. Buyers must weigh the advantages and risks of a deal against the risks and costs, and their internal justifications should be more compelling. Third-party consents are also more difficult to obtain, such as from customers or intellectual property licensing companies. M&A valuations will be difficult to determine given the coronavirus outbreak, and the well-known adage of “getting everyone in the same room” for a negotiation unlikely to be feasible at the moment.