Mergers and Acquisitions Essay Example | Topics and Well Written Essays - 1000 words - 1

Mergers and Acquisitions - Essay ExampleWhen big conglomerates are exposed to excessive put on the line owing to the fact that maximum investments are made in one or few particularised businesses, they choose to diversify business and acquire new firms.Another important financial reason undersurface spinal fusions is that of achieving economies of scale. The term, economies of scale, refers to cost advantages that a firm is able to enjoy because of its size, scale of operation and output. The cost per unit is get down with the increasing scales. Thus, the cost of operations is relatively lower in the combined business firm.Berkshire is a US-headquartered multinational conglomerate holding firm that has subsidiaries engaged in different business activities, including property and casualty insurance, energy, finance, food, cargo rail and so on and so forth.3G Capital and Berkshire Hathaway have collectively acquired the joint control of Heinz by way of purchasing shares. Heinz i s one of the well-known brands in the global food industry and has a score of providing tremendous value to its shareholders. Heinz had displayed a fast(a) and sustainable growth over years. Hence, Heinz is a safe and complaisant company to invest in. Given that both the acquiring partners were previously engaged in the food industry, the merger with Heinz has added to their existing product lines. Moreover, the companies will be able to gain access to a very strong distribution channel that generates 25% revenue from the emerging markets and approximately two-third of the same from outside the United States. By gaining access to the extensive distribution channels of Heinz, the two companies can in future add much companies to the portfolio, thereby further leveraging the system for bigger and costlier acquisition efforts. The Heinz brand generates about 40% of the gross sales and has a huge competitive advantage in sauces. The Heinz portfolio has 15 brands that are capable o f yielding more than $100 million sales on an annual basis (Stahl, Matzler and