Hey there reader, today I would be going an extra mile to give a comprehensive review on a unique, fantastic and somewhat new project from the financial sector. As you well know by now, there is a growing interest in what else the Blockchain Technology can do as it continues to mitigate and revolutionize sectors and systems it’s been integrated into. So today we would be talking about how the Blockchain Technology wants to redefine current M&A (Merger and Acquisition) transaction system. But before we get to that, let’s get a vivid understanding of M&A so as to better understand this project.
AN OVERVIEW
The present business world is of a developing economy and globalization, so the vast majority of the organizations are attempting to attain the highest profits possible from both the local and international market level. Step by step, various business attempts to accomplish a most understood objective which is, being the best by what you execute and arriving as fast as could be expected under the circumstances. So in trying to beat their rivals, firms accept different approaches to attempt and do in this manner. In this era, businesses pursue development. Each business wants to make substantial profits (development) over their rivals, so organizations are attempting to get ideal development by utilizing the most widely recognized alternate route i.e. Merger and Acquisition (M&A)
M&A EXPLAINED
M&A stands for Merger and acquisition. In definition, it means transactions in which the ownership of firms, companies, other business, organizations, or their operating units are transferred or consolidated with other entities. M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position as an aspect of strategic management. Source
In a simple explanation, Merger can be regarded as a coming together or joining together of two companies, firms, organizations, businesses to become one. After a successful legal Merger transaction, shareholders of both entities are granted partial ownership and control of the combined enterprise. On the other hand, An Acquisition (or takeover) in simpler terms here happens when a company, firm, organizations buy another company or business entity. Most times it usually involves a bigger company buying a smaller company which denotes a total possession of the smaller a company’s assets and liabilities.
Having a knowledge of M&A is not complete without fully knowing its benefits and boon which includes;
- Greater control over the market as huge strength is generated as a result of M&A.
- Another benefit is Synergy, this is like an influence that makes way for increased account efficiencies of the new entity and it takes the state of profits improvement and cost reserve funds.
- When two business entities combine, it brings about a general cost decrease which gives an upper hand, that is practical because of raised purchasing power and increased production runs.
- Risk reduction utilizing creative strategies of overseeing monetary risks.
- When a small venture with technological advancement performs M&A, the larger organization will hold or grow an aggressive edge.
- A major benefit of the M&A transaction is tax as it results in increased financial leverage and utilization of elective tax reductions.
PROBLEMS
Even with this enormous benefits of M&A, there still lies some challenges which place different kinds of barriers to these transactions. Some of these challenges include;
Pricing Difficulty: As with some financial transactions, the price factor comes into action in M&A negotiations and most times prove to be a deal breaker. This is often as a result of the overzealous pricing of the sellers and unfavorable/unrealistic offers from the buyers. This is most common where there is a technology/innovation associated with the deal from the seller.
Counterparties and Experts Are Not Easily Accessible; Counter-parties required to initiate an M&A transaction’s are not easily accessible as well as the Experts who are to be there to act as guides for a seamless transaction. This, therefore, results in sellers and buyers relying on individual contacts to look for counter-parties to their transactions which can often lead to a waste of time, effort, and money.
High transaction costs; In the current system, for an M&A transaction to be successful, it requires high cost and quite a long time (up to 2 years). Each party involved in the transaction would surely have to be paid and you can imagine the different persons involved as well as the cost they demand. This deters firms and organizations who would like to take the M&A process.
Intellectual Property Challenges; in this current system, there is the difficulty in valuing Intellectual properties due to its tangible and sometimes misunderstood nature.
These challenges have been fully considered a solution was developed which is a brilliant and unique solution to the M&A marketplace. In this particular article, I would only about the LEXIT Platform (marketplace and deal room). I Would talk on its other brilliant features later on, in subsequent articles.
ABOUT LEXIT
LEXIT is a unique blockchain based platform with an objective to tokenize the Mergers and Acquisition(M&A) marketplace which in turn would assist business owners and entrepreneurs with incorporating processes, ideas and innovation from projects that are failing or new companies into more flourishing projects. In short, LEXIT wants to bring an improvement on the traditional model by enabling M&A processes easy, uncomplicated, profitable to all and seamless in operation. They also want to break down all the barriers involved in the traditional M&A transactions.
LEXIT plans to do this by creating a platform which consists of a Marketplace and a Deal Room and has its stronghold on the blockchain technology. The LEXIT ecosystem is important as it facilitates the participation of buyers, sellers, experts, LEXIT Global Partners, an external partner. It has also been configured to open up M&A opportunities to any individual or entity, no matter how large or small.
THE MARKETPLACE
The LEXIT marketplace would to be more accessible than the traditional marketplace, it would be free to join, would contain a little listing fee for sellers who would want to create an auction for IP, assets, and parts of or entire companies. Acquirers would then be able to browse these auction listings on the searchable marketplace, instead of being faced with expensive scouting processes. Buyers also benefit as they can ask any questions or make further inquiries with sellers before bidding. The marketplace segment would also feature support from LEXIT platform experts, who would contribute their unbiased and accurate detailed information on a listing. After a seller accepts a buy offer, the transaction is then moved to the Deal Room segment.
DEAL ROOMS
By virtue of LEXIT technology, they developed virtual Deal Rooms, these rooms are secured spaces where non-disclosure agreements are signed, terms negotiated, and transactions finalized. Highly Robust security frameworks are also utilized to reduce any risk of breach, access to each Deal Room is guaranteed to be watertight as only authorized entities/individuals would be granted access. Lexit offers Experts to help guide deals in the deal rooms which would lead to improved transactions. Participants who are good members of the LEXIT ecosystem and have good records from deals participated in would be rewarded as well.
From this comprehensive introduction to LEXIT and it’s purpose, it’s glaring that the benefits of LEXIT are of high importance to the M&A in general. This is not all of the magnificent features of #LEXITco, I would be talking on the technical approach of Lexit towards creating these solutions and also talk on the LEXIT ecosystem participants. Stay tuned. For more information about #LEXITco, please feel free to visit the Website
Published by Dogecoin92
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