The Future of Online Merger and Acquisition Transactions

M&A is a crucial part of corporate life, and online M&A transactions are growing in frequency. When a merger or acquisition occurs, two businesses will combine to form one entity (merger) or buy the other entity from its current shareholders and take control of its operations (acquisition). Both kinds of M&As have significant financial consequences. Companies participate in M&A to capitalize on synergies and economies of scale, which can help them save money on unnecessary resources like regional and branch offices, manufacturing plants, research projects and the like. The savings from such savings in costs flow directly to the bottom line and are known as an accretive transaction.

Other reasons for M&A are competitive and strategic like gaining access to an emerging technology or capability, or expanding into new markets. Cisco recently purchased Purple Direct-to-Consumer mattress retailer, for $1.1 billion. Such deals are generally more attractive for investors than a typical equity deal, which involves the investor buying shares of the acquiring company and holding them for a long time.

M&A could be affected in the near-term by the coronavirus outbreak that is currently in progress. Buyers will have to weigh the advantages of a deal against risks and costs, and the internal justifications for making an offer are likely to be stronger. It may take longer to obtain third-party consents, such as from customers and intellectual property licensors. M&A valuations will be harder to determine because of the coronavirus crisis and the well-known adage of „getting everyone in the same room“ for a negotiation likely to be unattainable at this point.