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The Future of Online Merger and Acquisition Transactions

M&A is an integral part of the corporate world, and online M&A transactions are growing in frequency. During a merger two companies will join to form a single entity (merger), or they may purchase the other company from its shareholders and take over its operations (acquisition). Both kinds of M&As have significant financial implications. M&As are undertaken by companies to benefit from economies of scale and synergies, which helps them save money in wasteful resources, such as manufacturing facilities, branch and regional offices research projects, branch offices, and the list goes on. The savings resulting from cost reductions can be credited directly to the bottom-line and are termed a transaction that is profitable.

Other motives for M&A include strategic and competitive factors that include accessing new technology or capability, or expanding into a new market. Cisco recently acquired Purple the direct-to-consumer mattress seller for $1.1 billion. These deals are more appealing to investors than the typical equity deal in which the investor buys shares of the company acquiring them and then keeps them for a long period of.

The coronavirus pandemic is active, M&A activity may be lessened in the near term. Buyers will have to weigh the advantages and risks of a deal against the costs and risks, and their internal justifications will need to be stronger. Third-party consents will also be harder to obtain, including from customers or intellectual property licensing companies. M&A valuations are more difficult to establish due to the coronavirus crisis, and the well-known adage of “getting everyone in the same room” for a negotiation unlikely to be feasible at the moment.

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