Quite a lot of businesses make use of M&A in an attempt to develop in size and overtake their competition. Even though companies try to double their size organically in a process that can last years, this can be accomplished much faster by means of M&A.

This reason is probably one of the main motivating factors for M&A, likewise explaining why activity in the industry takes place in specific cycles. The drive to acquire a business that holds a valuable portfolio of assets before competitors do usually determines increased activity in dynamic markets, such as the massive M&A activities towards internet domains and telecommunications in the late 90’s and commodities and energy in the mid 2000’s.

Another reason why companies merge is to benefit from the synergy that takes place when two companies with a similar business profile combine, as this can strengthen or eliminate excess resources such as branches, production facilities, and research and so on.

Businesses likewise engage in M&A in an attempt to reign supreme in their specific business sector. However, taking into consideration that the combination of two large-scale corporations would most likely result in the monopolization of said sector, this type of transaction would be under the intense scrutiny of fair-competition observers and authorities entrusted with regulation.

While self-explanatory, business also take part in M&A with the goal of avoiding high taxation. As an example, since the USA currently operates the highest corporate tax rate around the globe, a number of renowned American enterprises have employed corporate inversions. This strategy is used by American companies acquiring a smaller foreign business and relocating the merged company’s operations to a foreign tax-friendly jurisdiction in order to avoid heavy taxation.