Mergers and Acquisitions: Goals Driving the Market

Mergers and acquisitions (M&A) are a powerful tool in the hands of modern businesses. Today, they are carried out not for the sake of a fancy press release about a merger, but to achieve specific, measurable results. The main goal of such agreements is to achieve a synergistic effect, expand the scale of operations, strengthen market control, or gain a decisive competitive advantage, which ultimately reflects in improved financial performance, increased capitalization, and a more efficient asset structure. In this article, we will discuss the goals of mergers and acquisitions in more detail.

When the Stakes are in Billions

Companies enter into M&A deals with a specific goal in mind – to gain a clear competitive advantage. The goals of mergers and acquisitions primarily aim at financial efficiency. For example, the merger of CVS Health and Aetna in the USA, which allowed for cost savings of $750 million in the first year through vertical integration and cost chain control.

Also in the spotlight is the reduction of operational duplication. The merger of Lufthansa and Swiss led to route consolidation, a 10% cost reduction, and a 6% increase in revenue per seat-kilometer.

Here are some motivating figures:

1. EBITDA growth after the merger of Kraft and Heinz – +28% over two years.
2. Scale savings after the Dell-EMC deal – $1.7 billion in the first year.
3. Increase in Disney’s market capitalization after acquiring Pixar – from $50 billion to $160 billion in 10 years.

These examples prove that a well-planned merger is not just a combination but a strategy for exponential growth. When the goals are clear and synergy is calculated, capitalization becomes a matter of time.

Synergistic Effect: Reality or Myth?

Most M&A deals plan for a synergistic effect as a central KPI. It determines how beneficial the merger of companies is and how quickly the business will achieve return on investment. Financial synergy allows for more efficient use of combined assets. Operational synergy eliminates redundant structures, while strategic synergy expands market influence.

For example, the acquisition of Instagram by Meta led to exponential growth in the user base. As a result, the capitalization of the parent structure increased by $250 billion in just 5 years.

Why Companies Pursue Mergers and Acquisitions: Key Business Goals

Highly competitive markets drive companies to pursue mergers. The goals are to eliminate competitors, acquire their market share, and strengthen the portfolio. In the pharmaceutical industry, the agreement between Pfizer and Wyeth serves as an example. After the deal, Pfizer obtained exclusive patents, expanded its product range, and increased its global market share from 6% to 11%.

Sometimes agreements take the form of hostile takeovers. This was the case when Kraft acquired Cadbury: the stock price sharply increased, investors profited, but employees and the market faced sharp cuts. The difference between mergers and acquisitions in such cases lies in the level of agreement and pre-agreements between the parties.

When Dividends are not an End Goal, but a Consequence

Investors perceive M&A as a tool to increase stock value. After a merger, stocks can rise by 10-15% over a short period, especially if rapid profit growth is expected. The goals of mergers and acquisitions in such scenarios are linked to maximizing profitability.

A classic example is the merger of Exxon and Mobil, which increased dividends by 40%, and the value grew from $240 billion to $530 billion in 10 years. The merger raised the level of technological integration and provided access to new oil fields in the Caspian region.

How to Achieve the Goals of Mergers and Acquisitions

After concluding such agreements, each company faces integration. This is a stage where the main risk lies: loss of pace, conflict escalation, loss of corporate culture. To fully achieve their goals, integration requires a plan in 5 key areas:

Expanded list:

1. Financial consolidation – merging balance sheets, reviewing credit lines, tax optimization.
2. Operational structure – process standardization, IT system unification, logistics.
3. HR strategy – retaining key personnel, eliminating duplicate positions.
4. Branding and communications – rebranding, customer loyalty support.
5. Legal cleanup – property status settlement, contract renewal, intellectual property protection.

For example, the merger of Amazon with Whole Foods. After the acquisition, Amazon lowered prices in 456 stores, introduced Prime as a basic loyalty system, and completely revamped logistics to its own standards.

What Determines the Merger Format

The form of the agreement affects the speed and outcome. Acquisitions are faster but come with significant legal risks. Mergers require agreements but provide more freedom in negotiations. The goals of such agreements are sometimes dictated not by strategy but by circumstances, such as bankruptcy, capital loss, or aggressive market expansion.

The deal value indicator may depend on the format:

1. The acquisition of IBM by Lenovo cost $1.25 billion, including asset transfer.
2. The merger of equals-partners Dow and DuPont was valued at $130 billion – with complete restructuring and division into three new companies within two years.

The choice of format is not just a legal formality but a risk management tool and a means of future business transformation. The more ambitious the goals, the more carefully the merger architecture is selected.

Risks and Barriers

Agreements carry high risks. Incorrect valuation, weak integration strategy, cultural differences, management resistance – all of these can decrease capitalization rather than increase it. The goals of such agreements are not achieved in 60% of cases if there is no post-integration strategy.

For example, AOL and Time Warner: a $165 billion deal resulted in a 90% drop in value, complete restructuring, and dissolution within 9 years. The reason was opposing business models, lack of synergy, asset overvaluation.

Conclusions on the Goals of Mergers and Acquisitions

The goals of mergers and acquisitions are achieved only when the strategy is based on accurate calculations, strict integration, and a clear market orientation. The merger should strengthen not just the structure but the outcome. Companies use M&A as a tool for breakthroughs – not for status but for future management. Here, scale, speed, and capitalization matter more than brand history.