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Mergers and Acquisitions

Mergers & Acquisitions, the Benefits of Operating a Publicly Traded Company in Today’s Environment

Mergers and acquisitions may in fact be one of the best moves for some companies under today’s more strenuous economic conditions. The reasons for this are quite simple. Many companies are struggling to keep their head above water and to fight those larger and more powerful companies they are competing with. However, for many, merging or acquiring another company may provide the strength necessary to overcome current economic conditions.

What is a merger? In a merger, one company assumes the assets and the liabilities of another business. This move allows the acquiring firm to maintain who it is as well as its operations while the firm being taken over will lose this. There are many ways to take over another company, including the purchase of all or some of the company’s stocks or by purchasing all of the outstanding shares of stock available, therefore taking ownership.

Why Do It and Why Do It Now?

In today’s economic conditions, the goal of any merger is to improve in some way. Often, the goal is to make some significant economic gain occur for the acquiring company. In other words, in order for any merger to be worthwhile, the value of the two companies together must be higher than the value of the companies when they are separate. What are the potential benefits?

  • Tax advantages
  • Combining the complementary resources of the two
  • Achieving economies of scale
  • Reducing any inefficiencies present
  • The acquiring company is able to obtain the rights to various services or products through the merger.
  • Reduce any weaknesses in the key business areas present.
  • Moving into new geographic locations where the company is not currently present.
  • Improving manager’s opportunities to improve and grow.

There are numerous potential benefits, but such processes are quite complex and therefore require substantial consideration. It is often the case that in today’s economic conditions and environment, companies must merge in order for them to grow. They often need to grow in order to survive the circumstances. By merging, the two companies are able to achieve bigger and better things.

The process of merging is one that takes a careful amount of consideration. Taking on the liabilities of another company, especially in the current environment, can be a risk for any size business that may be too much to overcome. In other cases, it can prove profitable for all involved in the transaction.

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