What is M&A?
M&A is an extremely complex business process that involves a significant change in corporate strategies. It can lead to positive growth and an increase in return on investment, or it could be disastrous if the plan is not well-thought out and implemented.
If you acquire another company you can increase your market share by reaching out to new customers and boosting revenue. But, finding the right company is essential to achieving success. Many times, a hasty purchase results in a shaky integration that is costly for the acquirer as well as the customer base of the acquired company.
Many M&A deals involve a horizontal merger, which involves combining competitors from the same sector. Cross-sector consolidation is also common when retail companies purchase tech companies or ecommerce businesses.
The initial steps of the M&A process are to create an inventory of potential target companies, having high-level conversations with each to examine how they can strategically work together and preparing for due diligence. The next step is negotiating and concluding a deal. The acquiring company will pay stock or cash subject to the terms of the deal.
The sale of a business is finalized once all closing conditions have been completed and the parties sign an agreement for sale. During the M&A process the antitrust authorities will examine the deal to ensure it does not create a market monopoly. Once the acquiring firm has passed the antitrust review, it can close the acquisition and transfer ownership of the target to the buyer.