M&A analysis

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Impact on Accounting:

Revenue Enhancement:

One of the foremost criteria for pursuing M&A is revenue enhancement. Revenue enhancement can take place due to numerous factors. First of all, when two firms merge, the merged entity results in higher revenue due to various synergies. As we all know that whole is greater than the sum of the parts, the same equation applies to effective Merger or acquisition transactions as well. The combined entity is able to exert greater control over the market with combined market share, improved product offerings and range with better cost control, combined marketing and sales strength, etc.

Here are some of the revenue side synergies that result in revenue enhancement for a merged entity:

Better customer base. The companies can share information on customers and cross-sell the products to the new pooled, larger customer base.
2. Bigger sales force. A larger group of salesperson can be more efficient in covering their markets and hence drive more business.
3. Product development. Merged company can often produce powerful new ideas through combined research and development that in turn can help better products for the target customer of the company and hence can stimulate sales for the new combined entity.
4. Advertising. The superlative promotional practices of each company can be combined to have greater sales which results in greater profits.

Cost Reduction:

Cost reduction after merger and acqusition takes place due to numerous synergies. First of all, when two firms merge or start working together, economies of scale sets in which helps in reducing the cost of production. Secondly, merged entity, being larger in size, have greater control over the value chain due to higher bargaining power and thus, it helps in reducing cost of production.

Cost also reduces during combined management strength, pooling of resources and infrastructure and ability to work together in an efficient manner. The best practices of the individual organizations are combined to produce synergies that leads to cost savings.

Some of the cost side synergies of mergers and acquisition:

1. Eradication of common services. A consolidation of duplicate corporate and field office locations can produce major cost savings for the combined entity post acquisition.
2. Employees related cost saving. Dealing with duplicate personnel is ...