The importance of M&A for the economy – The Portuguese case.

M&A, or mergers and acquisitions, is a term that refers to the combination of two or more companies, whether through a merger, an acquisition, an incorporation or a joint venture. This type of operation can have different objectives, such as increasing market share, diversifying the portfolio of products or services, reducing costs, expanding geographically, taking advantage of synergies, among others.

But how important is M&A to the economy? Firstly, M&A can contribute to increasing the productivity and competitiveness of the companies involved, which can generate benefits for consumers, suppliers, employees and shareholders. Furthermore, M&A can stimulate innovation and technological development, as companies can combine knowledge, resources, capabilities and technology. Finally, M&A can favor the efficient allocation of capital, as companies can combine productive assets and benefit from economies of scale.

However, M&A can also present some challenges and risks to the economy. For example, M&A can result in excessive market concentration, which can reduce competition and harm consumers. Furthermore, M&A can involve high transaction and integration costs, which can compromise the profitability and sustainability of companies. Finally, M&A can generate cultural and organizational conflicts between the companies involved, which can affect employee performance and motivation.

Therefore, M&A is a relevant phenomenon for the economy, which can bring advantages and disadvantages to companies and society. For M&A to be successful, companies need to make a careful assessment of the opportunities and risks involved, as well as effective management of the integration process.

The Portuguese business fabric, in our opinion, needs market consolidation in almost all sectors, aiming to gain scale and competitiveness at an international level. Foreign investment combined with market consolidation and the ideas of Portuguese entrepreneurs will result in a source of Intellectual Property generation.

This past October, an event was organized by Abreu Advogados, in partnership with TTR – Transactional Track Record and the newspaper ECO, on M&A activity in Portugal with the aim of presenting the report “Portugal M&A Report – An overview of the Portuguese M&A activity”.

In this presentation, the four most attractive sectors for foreign investors were identified: real estate and construction; energy and renewable energies; technologies and telecommunications; and financial and insurance sector. Throughout 2022, the M&A sector recorded growth of 8.7%, with growth in the value of transactions in average terms being 11%. (ECO Newspaper).

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