What is M&A?
- August 31, 2024
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M&A is a highly complex business process that requires an important change in corporate strategies. It can lead to positive growth and returns on investment, or it can be disastrous when the strategy is not well thought-out and implemented.
By purchasing a different company, you are able to expand your reach by gaining new customers and increasing revenue. However, choosing the right company is essential to achieving success. Many times an unplanned purchase can result in a failed integration that is costly to the acquirer as well as to the customer base of the acquired company.
Many M&A transactions involve either a horizontal merger (combining two or more competitors from the same industry) or a vertical merger (extending supply chains). Cross-sector consolidation also is common when retail companies purchase technology companies or ecommerce firms.
The initial steps of the M&A process are to create an outline of potential companies to target, conducting high-level conversations with each to examine how they can strategically work together, and preparing for due diligence. Negotiating and finalizing the deal is the next step. Based on the deal, the acquiring company may pay in cash or stock.
The sale of a company is concluded when all closing conditions are fulfilled and both parties sign the sales agreement. During the M&A process the antitrust authorities will scrutinize the transaction to ensure it doesn’t result in a monopoly in specific markets. Once the acquiring company has passed the antitrust review, they can officially close the acquisition and transfer ownership of the company they are targeting to the buyer.
