Equity as a source of capital

Equity as a source of capital

Equity, as a source of capital, is a beneficial strategy in a merger and acquisition process. Economies of scale provide that through a merger and/or acquisition the management cost is cheaper and productivity is improved. The equitable merger between the United Technologies Corp. and the Raytheon Corp. involves two strong players in the market and their pooling of resources through equity eradicates the payment of interests. This is explained by the fact that the companies had a mutual agreement to merge their firms to create a powerful brand and ensure conservative economies of scale and increased profitability. Equity is also beneficial as it has no principal amount to be repaid by the merging companies hence, the merging and acquisition process is affordable. The unavailability of the principal is advantageous from the perspective of business conduction as the amount can be used in innovation and improvement of already available products. Additionally, the non-existence of restrictive covenants in the issuance process strengthens the amicable combination of effort from both parties, that is, the UTC and Raytheon Corp to create a productive Raytheon Technologies Corporation. The company will be able to combine their expertise and provide a product that accumulates the aerospace and defense making the production cost level and its customers accessing two major services from the same company.