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The Strategic Advantages and Benefits of Mergers and Acquisitions (M&A)

Business alliances often reveal their inherent powers through collaboration. It’s like a well-coordinated team in a sports match showcasing their individual strengths to achieve a common goal.

In our post, we invite you to explore the main strategic advantages of the deal and real-life examples. Also, we’ll tell you about virtual data rooms that streamline the transaction, ultimately helping you achieve all the benefits we’ll mention below.

Top five strategic benefits of M&A

We selected the main advantages that companies get after a successful business merger and described several examples to help you understand how it all works in real life:

1. Economies of scale – influence and clout

Consolidated businesses gain better access to capital and have increased bargaining power. In addition, they often reduce costs through high-volume production.

2. Economies of scope – maximized production

Here, businesses lower costs by producing related products together. In simpler terms, one product helps lower the overall costs of another.

A restaurant can make chicken fingers and French fries more affordably together than if two different businesses made them separately. This is because they can share the same storage, fryers, and cooks for both items during production.

👁️‍🗨️What is the difference between mergers and acquisitions and divestiture? When a company buys or merges with another, we call it an M&A. When a business sells or disposes of assets, it’s a divestment. Explore divestiture meaning, reasons for the deal, and real-life examples.

3. Competitive edge – strengthened market dominance

Mergers and acquisitions make both companies stronger financially. This strength can help them gain more of the market, have more customer sway, and reduce competition since larger companies are more challenging to compete with.

T-Mobile and Sprint merged to rival Verizon and AT&T. They managed to do it by offering a more robust network, a wide range of services, and more competitive pricing plans.

4. Best talent acquisition – strategic human capital enrichment

Generally, large and well-known companies across industries have a higher concentration of big talents. Therefore, many businesses access a broader talent pool and expertise through mergers and acquisitions.

Facebook acquired Instagram for around one billion dollars. This acquisition helped Facebook to widen its user base and access Instagram’s skilled workforce, innovative culture, and top talent in mobile app development and social media marketing.

5. Easy access to resources – enhanced production efficiency

When companies in the same industry join, they can improve their access to materials, suppliers, and other essential resources.

Tesla merged with SolarCity, gaining access to solar technology and energy storage. Through this deal, Tesla created an efficient approach to sustainable transportation and energy solutions.

As promised, we are now proceeding to a virtual data room, a solution created explicitly for M&A deal makers.

What is a dataroom?

It is a secure online storage space where potential buyers and sellers can access and share important documents. In addition, it offers multiple collaboration tools, which allows all parties to collaborate in a single protected space.

Virtual data room interface

Next, see how this technology simplifies the deal.

How can the software streamline M&A?

The rich functionality of virtual data room providers gives you the following advantages:

  • Enhanced due diligence. The solution streamlines the procedure by providing a secure platform for sharing sensitive documents, enabling potential acquirers to assess the target company’s status more efficiently.
  • Improved collaboration. Stakeholders can exchange feedback and address concerns in real time. Thus, a data roomhelps improve transparency and trust among the parties involved.
  • Data security and compliance. Advanced security mechanisms protect sensitive information, ensuring compliance with data privacy regulations and instilling confidence in buyers and sellers.
  • Efficient deal management. You can manage all aspects of the M&A deal lifecycle, including document storage, review, and tracking of deal-related activities within spaces. This way, data room providersaccelerate deal execution and reduce administrative burden.
  • Global accessibility. The platform enables stakeholders to collaborate on deal-related documents and communicate from anywhere. Thus, geographically dispersed teams work together as if they are in the same office.

Looking at the wide functionality of the software, you might be wondering about the cost of its integration. We are ready to answer.

What is a data room price?

It depends on several factors, including the following:

  • Data storage volume. Some providers price by the number of GBs, while others offer packages with a set amount of storage.
  • Number of users.Packages typically include a specific number of user licenses, with additional charges for extra users.
  • Number of admins. Administrative users, who control settings and document activity, may be limited to a certain number or offered unlimited access.
  • Document management tools. Features like drag-and-drop, bulk upload, and e-signature often make the service more expensive.
  • Security features. Providers with international certifications and advanced security features may have higher data room costs.
  • Client support. 24/7 personal assistance versus regular email support can impact pricing.

When you compare virtual data rooms, choose a product that offers as many functions and security as possible for its cost.

Final thoughts

Mergers and acquisitions can become a crucial stage in the life of your company, bringing in more recognition, profit, and market presence. However, you need to complete a successful transaction to achieve it all. Thankfully, modern technological solutions can be of great help. In particular, these are virtual data rooms explicitly designed for deal makers.

So, explore the software functionality, study each virtual data room review from users of your industry, and integrate the tool to kick-start the transaction.

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