MONETA VOL 21 MONETA VOL 21 | Page 18

Issue No: 21 Moneta the company. On an average company’s earnings have been increasing by 20%-25% because of effective M&A strategies. Companies many times adopt an M&A strategy because they do not have resources and data which they can get by acquiring another company. The top reason for such deals are 1) Expanding 2) Get an edge over the competitors 3) Advantages of Economies of scale and Synergy 4) Getting access to advanced technology 5) Getting tax benefits 6) Increased speed to market 7) Diversification 8) Increasing the market share. Start-ups like Flipkart constantly seek M&A opportunities to keep themselves updated with new technology and database. July 2017 attract investors so as to get more and more funding. And hence strategic management now plays a key role in sustaining the market. For a moment you are at the top and the next moment the competitor's merger-acquisition will hit you hard. Many companies also prefer buying a financially weak company, the main reason being, even though the company is not performing well it has a good business model. Thus a good management can turn it into a good future opportunity. Companies like Third Capital Inc. are great example of it. It might seem like mergers & acquisitions are key to success but this not the case every time. The opposite has an equally likely probability of holding true. Many big M&As have failed due to cultural differences, flawed intention, employee denial, incorrect valuation and wrong management. Big companies like Reliance Industries, Suzlon energy, Tata steel, Apollo tyres, Rcom have failed after M&A. If and only if companies have good management skills and great financial support they can succeed. So correct valuation, proper execution, time frame. The trend of mergers & acquisitions is playing a major role in the Indian economy, especially after the government started many initiatives of merging government entities with an aim to make the processes simpler and effective. Recent examples of M&A deals are HPCL and ONGC, IDFC Bank-Shriram Capital, ABC bearings and Timken India, Vodafone-idea Cellular, Axis bank-Freecharge etc. Some of India's biggest start-ups including Paytm, Freshworks, Quickr, OYO Rooms, Flipkart and others have made several acquisitions in a bid to expand their geographical reach and beat competitors by having large market share. Also, start-ups are considering acquisitions and mergers to expand services and Completion and focused long term strategy and growth are the key components to make it a success. So 2+2 can be 3 as well. - Hitesh Jain NMIMS , PGDM 2016-18 16