First, quickly enter the host market and occupy market share.
1.M&A effectively reduces the barriers to entering new industries. When preparing to invest in new construction, enterprises must fully consider all entry barriers and the impact of new production capacity on the balance of supply and demand in the industry. If the new capacity is large, there may be overcapacity within the industry, which may lead to price wars.
However, when M&A method is used, the barriers to entry can be greatly reduced. Because mergers and acquisitions have not added new capacity to the industry, the competitive structure within the industry will remain unchanged in the short term, so the possibility of triggering price wars or retaliation is greatly reduced.
2.M&A greatly reduces the risk and cost of enterprise development. The method of investing in new construction involves not only building new production capacity, but also spending a lot of time and financial resources to obtain a stable source of raw materials, find suitable sales channels, and explore and compete for markets.
Therefore, this method involves more uncertainties, the corresponding risks are greater and the risk cost required by the capital market is higher. In the case of mergers and acquisitions, enterprises can make use of the raw material sources, sales channels and occupied markets of the original enterprises, and the capital market also has a certain understanding of the original enterprises, which can greatly reduce the uncertainty in the development process and reduce risks and costs.
3.M&A makes full use of the experience curve effect. In many industries, as enterprises accumulate more production and operation experience, they can observe the downward trend of unit cost. The decrease of cost is mainly due to the improvement of workers' working methods and operating proficiency, the application of special equipment and technology, the gradual understanding of market distribution and market rules, and the reduction of operating costs and management expenses in the production process.
Because of the inherent characteristics of experience, enterprises can't get this experience by copying, hiring employees of the other company or buying new technology or equipment, which makes experienced enterprises have a competitive advantage in cost.
4. Enterprises can gain competitive advantage in science and technology through mergers and acquisitions. Science and technology are playing an increasingly important role in economic development. The competition between enterprises in cost and quality often turns into competition in science and technology. Enterprises often engage in M&A activities to gain advantages in production technology or product technology.
One of the main motives of transnational corporations' foreign direct investment is to occupy the host country market, and M&A is the quickest way to occupy the host country market, because it can use the existing production and sales channels, and through M&A, transnational corporations can immediately gain the status of the host country.
For the manufacturing industry, the most basic feature of M&A is that it can save the time of building factories, quickly obtain ready-made production factors and quickly establish foreign production and marketing bases. Therefore, M&A is beneficial for enterprises to respond quickly and seize market opportunities.
Two, the effective use of related business resources of the merged enterprise.
Mergers and acquisitions of host country enterprises are beneficial for investors to obtain various business resources that are difficult to obtain through creative means, including but not limited to the following:
1, enter the original distribution channel.
2. Obtain the technology of the acquired enterprise.
3. Obtain the trademark of the acquired enterprise.
4. Use the original management system and human resources.
5. Use of enterprise-specific assets such as raw material supply.
6. The use of intangible assets such as the original goodwill,
Third, fully enjoy the financing facilities of foreign direct investment.
In order to make foreign direct investment, multinational companies often need to obtain financing from the capital market. Compared with the creative model, M&A is easier to obtain financing, because M&A has less uncertainty. Secondly, M&A can recover its investment more quickly because of its rapid income. Once a multinational company has acquired the target enterprise, it can adopt the following methods to avoid the risk of direct investment and reduce the direct investment of its own capital through creation.
1. Financing is conducted in the form of stock exchange. With the establishment and development of joint-stock companies, a large number of shares of joint-stock companies enter the stock market, and it is possible for enterprises to master a certain share of the shares of the target enterprise through share exchange between joint-stock companies, so as to control the share capital of others and occupy other enterprises.
2. Issue corporate bonds in the securities market with the physical assets and future income of the target company as collateral;
3. Take the physical assets and future income of the target company as collateral, and directly finance from financial institutions.
Fourth, buy assets cheaply.
M&A is sometimes cheaper than creation. Multinational companies often buy existing foreign enterprises at low prices. There are three main situations. The first case is that the enterprise engaged in mergers and acquisitions sometimes knows more about the actual value of the assets it owns than the target enterprise.
For example, the target enterprise may own valuable land or real estate that has been amortized at historical depreciation cost, but it still remains in the books. It sometimes underestimates the current replacement value of such assets, thus making the acquirer buy the enterprise cheaply. The second situation is to buy unprofitable or loss-making enterprises at a low price and use the difficulties of the other party to lower the price. The third situation is to use the stock price crash to acquire enterprises.
Legal basis:
Company Law of the People's Republic of China
Article 43 The discussion methods and voting procedures of the shareholders' meeting shall be stipulated in the articles of association of the company, unless otherwise stipulated in this Law.
The shareholders' meeting shall make resolutions on amending the Articles of Association, increasing or decreasing the registered capital, and on the merger, division, dissolution or change of corporate form of the company, which must be approved by shareholders representing more than two thirds of the voting rights.