Mergers and acquisitions are strategic tools that provide growth, expansion of markets, and competitive advantage. However, they can pose risks and challenges. The complexities of M&A need to be understood by managers and executives who are navigating the M&A landscape.

M&As can bring a number of benefits for the target and acquiring companies. These include larger economies of scale, improved distribution and purchasing power in addition to accessing fresh material and nonmaterial resources, capabilities of the corporate in risk management, geographic expansion, and much more.

The M&A process may take considerable time, energy and money. The businesses involved could have to forfeit other opportunities. Additionally, a merger or acquisition can create diseconomies of scale for consumers, since the combined market share might cause them to pay higher prices for products and services.

An acquisition can be a hostile or friendly transaction. In a hostile transaction an entity will pay a premium to the owners of a target business over what they believe the business is worth. The acquiring business then takes control of the target company thus removing any future competition and gaining a bigger market share.

The acquiring firm can also purchase the assets of the target company and leave it with nothing but cash. (And perhaps some debt if there is one). In this kind of deal the acquiring company does not usually retain employees from the business it acquired. It might hire some of the employees of its acquired company, but it will retain its name.