The Key Objectives and Strategic Value of M&A: Why Do Companies Opt for M&A?

Mergers and Acquisitions (M&A) are not merely about combining or acquiring companies; they are crucial tools for achieving a company's strategic objectives and securing long-term competitiveness.

In this column, we explore the value that companies can gain from M&A through key purposes such as expanding market share, creating synergies, diversifying industries, securing technology and assets, and reducing operating costs.

1. Expanding Market Share

M&A is widely used as a strategy to quickly expand market share by acquiring competitors in a mature market.

By acquiring competing firms, competition within the industry can be reduced, thus strengthening influence in the market.

Particularly in markets where new entry is challenging, acquiring competitors is faster and more effective than new market entry.

Consequently, M&A becomes a powerful growth tool for firms seeking rapid expansion in stable markets.

2. Enhancing Competitiveness and Creating Synergy

One of the primary objectives of M&A is to create synergistic effects by combining the strengths of two companies.

This can lead to increased operational efficiency, reduced costs, and enhanced technological capabilities.

In practice, integrating the supply chains of two companies can reduce logistics costs or enhance R&D capabilities to secure a technological edge.

Such synergistic effects become essential elements in enhancing a company's competitiveness by creating value unattainable by either company alone.

3. Industry Diversification

Expanding into new fields beyond existing businesses, known as 'diversified acquisitions', plays a significant role in spreading risks and expanding growth potential.

Companies can secure stable revenue sources or pioneer new markets to lay the foundation for long-term growth.

If an automotive manufacturer acquires an electric vehicle battery producer, they gain enhanced competitiveness in the electric vehicle sector while dispersing risks associated with the traditional automotive industry.

4. Securing Technology and Assets

In industries where technology acts as a critical competitive factor, M&A offers an efficient means to quickly acquire necessary technologies or patents.

While in-house development can require substantial time and resources, acquiring a company with relevant technology can shorten this process.

Additionally, companies can easily acquire human resources, brand assets, and intellectual property, enhancing competitiveness and potentially lowering entry barriers into new markets.

5. Reducing Operating Costs

Integrating redundant departments or resources to reduce operating costs is also one of the primary purposes of M&A. It significantly contributes to realizing economies of scale and improving operational efficiency.

By integrating IT systems, production facilities, or human resources, companies can restructure into more efficient organizations and gain financial benefits through cost reduction.

This cost-saving effect contributes to short-term profitability improvement and establishes a foundation for strengthening long-term competitiveness.

6. Conclusion

An M&A strategy tailored to a company's goals and circumstances creates value beyond simple acquisitions.

Through successful M&A, companies can secure long-term competitiveness and find new growth opportunities.

Thank you.