M&A is a complex business process and a major change in corporate strategy. It can result in positive growth and returns on investment however, it can also be disastrous when the strategy is poorly thought out and implemented.
By acquiring another company, you can expand your market reach by reaching out to new customers and boosting revenue. Finding the right company, but, is essential to your success. Many times an unplanned purchase can result in a failed integration that is costly to the acquirer as well as to the customers of the acquired company.
Many M&A transactions involve horizontal mergers (combining companies in the same industry) or a vertical merger (extending supply chains). Cross-sector consolidation is also common when retail companies purchase technology companies or ecommerce firms.
The initial steps of the M&A process include creating an outline of potential companies to acquire, conducting high-level meetings with each to explore how they strategically fit together and making preparations for due diligence. Negotiating and finalizing the deal is the next step. The company buying the acquisition may pay in stock or cash in accordance with the deal.
The sale of a company is concluded when all closing conditions are satisfied and both parties sign the agreement to sell. During the M&A process an antitrust authority will look over the deal to ensure it doesn’t create a monopoly in specific markets. After the acquirer has passed antitrust review and has been approved to close the deal and transfer ownership of the target company to the buyer.