How mergers and acquisitions shape the way we buy
Beyond occupying the headlines of the Finance news section, the M&A industry shapes the way products are created and how we consume them. Mergers and acquisitions are currently booming in a variety of industries including pharmaceuticals, soft drinks, health insurance, and even entertainment. Earlier this year Disney acquired 21st Century Fox in a $51 billion deal that will allow them to control the film catalogue of one of the biggest players in Hollywood.
Understanding the M&A industry
There is a common misconception that the term M&A encompasses a single process. Mergers and acquisitions actually describe the two different ways in which two companies can become a single one. A merger takes place when two businesses of the same size join, while acquisitions is the process in which a big company buys a smaller one.
The overall value of the M&A industry is projected to surpass $5 trillion USD by the end of the year, yet few acquisitions stand out unless there are high-profile acquirers and dollar figures. Some of the biggest deals of the first half of 2018 are Paypal’s acquisition of iZettle ($2.2 billion), Keurig’s acquisition of Dr. Pepper Snapple Group ($21 billion), and Microsoft’s acquisition of GitHub ($7.7 billion).
Mergers and acquisitions are usually slow, taking an average of 24 months to reach completion. LEXIT, a marketplace focused on serving the M&A ecosystem, aims to decrease closure times and operational costs through the digitalization of the auditing stage, identity verification powered by blockchain, and smart contracts.
Consumers and the aftermath of M&A deals
Once a deal is closed, there are different ways in which an M&A transaction may affect the clients of the involved companies. Over 100,000 subscribers left GitHub after its acquisition was announced, migrating their accounts to other code repositories. Product prices may increase, since the market will have less competitors. If the production process is optimized as a result of the deal, then customers may see lower sticker prices. When the involved companies are complementary, consumers usually face less steps to access their range of services.
The bottomline is that the effects of an M&A deal on the way we buy could be immediate, as it happened in the case of GitHub, or delayed. Such is the case of Disney, since the effects of the 21st Century Fox deals will be only noticeable in the box office and streaming performance in the years to come.