Classroom Companion: Business

14.2 
 Motivations for M&A
Mergers and acquisitions are complex and expensive undertakings. Hence, the 
involved companies must have clear business motivations when initiating 
M&A. The overall motivation is that the outcome will benefit business operations 
for the involved companies compared to the situation before the M&A. This may 
include one or several of the following:
5
Getting rid of a competitor by first acquiring and then shutting down the com-
petitor; also referred to as killer or zombie acquisition (Argentesi et al., 
2020
).
5
Increasing the user base by merging the markets of the two companies. The 
motive for a mobile network operator to acquire a mobile network operator in 
another geographical region is to increase the user base and, as result, increase 
both revenues and value on the stock exchange.
5
Achieving economy of scale advantages since merging two companies often 
reduces common costs for administration, research, marketing, inventory, and 
other expenses.
 
Chapter 14 · Mergers and Acquisitions

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5
Getting control of larger parts of the production and delivery chain; for exam-
ple, a mobile network operator acquiring retailers selling smartphones, tablets, 
and other terminal equipment.
5
Increasing market shares, for example, by attaching a competitor as a subsid-
iary.
5
Increasing revenues by absorbing a competitor and use the increased market 
power to set prices and thereby raising the revenues to more than the previous 
sum of revenues of the two companies.
5
Improving geographical diversification by acquiring similar companies offering 
the same service or good in a different geographical region.
5
Increasing the product portfolio, for example, offering video games as a supple-
ment on a social media platform.
5
Utilizing synergy between different product categories, for example, acquiring 
companies producing complementary products.
5
Acquiring new skills and technologies, for example, buying promising startup 
companies or manufacturers of highly specialized equipment or services.
5
Expanding into new profitable market segments. This is one of the reasons why 
Google bought YouTube.
5
Marketing under a more recognized brand. This is often the motive behind 
backflip takeovers as explained above.
5
Developing a promising concept, for example, by buying startups.
5
Acquiring access to patents, protected content, shielded brand names, and 
other IPR.
In the digital economy, there have been particularly many M&A as shown in 
.
Table 
14.1
. Many of these companies have expanded into almost all areas of 
ICT, becoming digital conglomerates. These companies are constantly scanning 
the market for potential acquisitions to increase the value of their business opera-
tions.
. Table 14.1 Mergers and acquisitions in the digital economy. (Authors’ compilation)