Effects of Accounting

 It is the objective of numerous medium and small-sized organizations, as they look to reduce the cost per unit through the enhancement of economies of scale. It makes simpler for the companies to enter and gain access to cheaper markets when they look for purchase in bulk as their requirement is also enhanced.

The main factor that leads to a merger and acquisition is the motivation for revenue enhancement. The expectation to sell the product to a larger base of consumers by an increase in the distribution channels of the combined entity. (Schubert) Some companies also embark the use of product diversifications as they merge with other organizations in different geographical locations where they have no access previously such that their market becomes available in other places as well.

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It is also argued that the revenue enhancement is a more difficult aspect to realize compared to that of cost reduction as only a few firms are able to expand in a new market and procure further distribution channels.

Companies in quest of mergers and acquisitions are always looking to reduce the risk that they bear in the market environment by adding up further capital, means of expansion and steady growth which could secure their place in the market.

There is a great impact of risk management on the merger and acquisition transaction as the firms that are looking to merge share the burden of each other and can put forward more capital input together, therefore sharing the risk of capital exhaustion. Since the companies together have a better strength of payback, they are able to acquire more loans in time of need as their payback capacity also enhances through their combination.

The mitigation of risk is the prime factor of merger and acquisition as entities that merge or acquire other entities have access to more resources where they can handle more pressure at a difficult time.

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