M&A motivation:
1. Multiple risks: Any enterprise will encounter market risks or fluctuations. Some years may be better, some years may be depressed, and any enterprise may be helpless.
2. Reduce transaction costs: Mixed M&A or diversified operation represents a mechanism to obtain joint economic benefits, that is, it can supply investors to many enterprises that produce different final products at the same time. For example, diversified enterprises can use the same proprietary technology or technical knowledge and inseparable special physical assets at the same time.
3. Managing inefficient enterprises: that is, allocating the management rights or functions of inefficient enterprises to efficient enterprises, in other words, efficient enterprises take over or merge inefficient enterprises. Acquisition is an effective market way to replace incompetent managers. More generally, whenever the market value of an inefficient enterprise is low, or when the potential takeover income of an efficient enterprise is greater than the takeover cost, if the manager of an efficient enterprise has enough experience to confirm this fact, then takeover will occur.
4. Establish a large enterprise: any form of M&A may involve the rearrangement of resources. Generally speaking, the bigger the goal of M&A, the more resources it needs and the higher the transaction cost. Only large enterprises can have more resources for M&A, and the possibility of being threatened by takeover is the least.
5. Goal maximization: the desire of operators to maximize their own goals is a motivation for mixed mergers and acquisitions, especially some large-scale mixed mergers and acquisitions. In other words, operators may not really intend to improve the efficiency or profitability of enterprises, but for their better welfare.
Tips: The above contents are for reference only.
Reply time: 2022-0 1-05. Please refer to the latest business changes announced by Ping An Bank in official website.