What if the acquisition is made with cash? We haven't seen the revenue, or profit being made before Q2 yet. What about Q3 or Q4? If you know you will be coming into a lot of money, would you wait until you have your money before negotiating or waste time by waiting until the money comes in to start negotiations? Should VERB wait until they are cash flow positive? Is that what other large NASDAQ companies do? I'm not saying that all mergers or acquisitions turn out good, but there can be really good reasons for VERB to continue to do this even when not yet cash flow positive.
Why do companies engage in M&A?
Some of the most common reasons for companies to engage in mergers and acquisitions include:
To become bigger. Many companies use M&A to grow in size and leapfrog their rivals. in contrast, it can take years or decades to double the size of a company through organic growth.
To pre-empt competition. This powerful motivation is the primary reason why M&A activity occurs in distinct cycles. The urge to snap up a company with an attractive portfolio of assets before a rival does so generally results in a feeding frenzy in hot markets. Some examples of frenetic M&A activity in specific sectors include dot-coms and telecoms in the late 1990s, commodity and energy producers in 2006-07, and biotechnology companies in 2012-14.
To create synergies and economies of scale. Companies also merge to take advantage of synergies and economies of scale. Synergies occur when two companies with similar businesses combine, as they can then consolidate (or eliminate) duplicate resources like branch and regional offices, manufacturing facilities, research projects, etc. Every million dollars or fraction thereof thus saved goes straight to the bottom line, boosting earnings per share and making the M&A transaction an “accretive” one.
To achieve domination. Companies also engage in M&A to dominate their sector. However, a combination of two behemoths would result in a potential monopoly, and such a transaction would have to run the gauntlet of intense scrutiny from anti-competition watchdogs and regulatory authorities.
Good article to read.
https://www.investopedia.com/articles/investi...ompany.asp
Why do companies engage in M&A?
Some of the most common reasons for companies to engage in mergers and acquisitions include:
To become bigger. Many companies use M&A to grow in size and leapfrog their rivals. in contrast, it can take years or decades to double the size of a company through organic growth.
To pre-empt competition. This powerful motivation is the primary reason why M&A activity occurs in distinct cycles. The urge to snap up a company with an attractive portfolio of assets before a rival does so generally results in a feeding frenzy in hot markets. Some examples of frenetic M&A activity in specific sectors include dot-coms and telecoms in the late 1990s, commodity and energy producers in 2006-07, and biotechnology companies in 2012-14.
To create synergies and economies of scale. Companies also merge to take advantage of synergies and economies of scale. Synergies occur when two companies with similar businesses combine, as they can then consolidate (or eliminate) duplicate resources like branch and regional offices, manufacturing facilities, research projects, etc. Every million dollars or fraction thereof thus saved goes straight to the bottom line, boosting earnings per share and making the M&A transaction an “accretive” one.
To achieve domination. Companies also engage in M&A to dominate their sector. However, a combination of two behemoths would result in a potential monopoly, and such a transaction would have to run the gauntlet of intense scrutiny from anti-competition watchdogs and regulatory authorities.
Good article to read.
https://www.investopedia.com/articles/investi...ompany.asp
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