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The going concern principle governs the way firms operate, and companies opt for mergers and acquisitions (M&A) to salvage financial and operational challenges. Synergy, fast growth, competitive advantage, and changing markets are elements that drive companies into M&A. Firstly, synergy is a crucial element that prompts M&A among companies. It entails combining two independent companies to increase their value and performance. Revenue, financial, and cost are some of the synergies that companies consider before merging. The management evaluates the combined revenue ability, cost reductions, and the economic advantages of a merger. Secondly, increased growth exhibited in industries resulting from technological advancements and globalization prompt M&A. The continued advances threaten operations of medium-sized firms which opt to join larger entities. Thus, synergies and increased growth drive firms into adopting M&A.
Furthermore, competitive advantage and capital market access trigger an increase in firms merging to help remain operative. The entry of new companies into a sector can impact the market cap and clientele base. Therefore, a merger can facilitate continued operations and a competitive edge in an industry since the M&A increases workforce and equity. Lastly, the ability to access the capital market drives organizations to adopt M&A. However, the intended growth and expansion require significant capital, and M&A facilitates listing in the stock market. Through initial public offers, firms can raise the equity needed to accomplish their objectives. Thus, gaining a competing edge and listing in the capital market triggers firms into undertaking M&A.
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