The COVID-19 pandemic has meant big changes for many businesses. Zoom’s stock took off in March and hasn’t looked back since. This company is much more profitable now than ever before. Amazon has become even more popular and profitable than it’s ever been before. On the other hand, many brick-and-mortar businesses have suffered. Almost no one is working from the office. Some corporations have even cancelled their leases. Small retail stores have been ordered closed in many locales. Some of them will not recover.
Ultimately, the pandemic has exposed and exaggerated the strengths and weaknesses of many companies. The gap between successful enterprises and troubled ones has never been more evident. For healthy companies, the pandemic has been great. It’s a time of consolidation for businesses that can afford to acquire others. That’s one reason that mergers and acquisitions are starting to become more common.
Of course, mergers and acquisitions can be great for the seller, too. For some people, the pandemic has made them realize they’re ready to get out of the rat race. These entrepreneurs know that they’re ready for retirement. In that situation, selling out to a company that’s in an expansion phase can be a great solution. Sellers who’ve performed well in prior recessions can be a sought-after target. They can sometimes command very healthy prices.
Overall, mergers and acquisitions can have plenty of benefits for both companies involved. These transactions are designed to make the most of economies of scale. That means things like reducing overhead while reaching ever more customers. In some cases, acquiring another company makes it possible to add a new service related to a company’s core offering. That’s just one more way consolidation can be the right move for two businesses.
There’s one other reason that the market for mergers and acquisitions is heating up right now. With an election right on the horizon, there’s a chance that the tax code will change to favor these kinds of transactions. So some companies are taking the plunge and trusting that the decision will work out for the best in the long run. Of course, it’s always important to perform due diligence and run complete financials before committing to this kind of transaction.