Mergers and Acquisition

(geographic diversification). Product Diversification focuses on new product markets.

On the other hand, Geographic Diversification focuses on new international markets.

Companies buy companies to reach new markets and grow revenues and earnings. A merge may expand two companies' marketing and distribution, giving them new sales opportunities. A merger can also improve a company's standing in the investment community: bigger firms often have an easier time raising capital than smaller ones.

For example, in 2008, HP bought EDS to strengthen the services side of their technology offerings (this deal was valued at about US$13.9 billion).

Capturing Large Market Shares As the company absorbs a major competitor, it will be able to increase its power (by capturing increased market share) to set prices. – http://www.huntlawgrp.com Companies may decide to merge into order to gain a better distribution or marketing network. A company may want to expand into different markets where a similar company is already operating rather than start from ground zero, and so the company may just merge with the other company.

This distribution or marketing network gives both companies a wider customer base practically overnight.

One of the things we look for when watching for a market bottom is an increase in merger and acquisition (M&A) activity. This merger, along with several, was a big tip