M&A is a complex business process and a major change in corporate strategy. It can lead to positive growth and an increase in return on investment, but it could be disastrous if the strategy is not properly thought out and implemented.
By acquiring another company, you can expand your market reach by reaching out to new customers and increasing the amount of revenue. However, choosing the right company is crucial for success. Many times an unplanned purchase can result in a failure to integrate that is costly to the acquirer as well as to the customers 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 a common and involves retail companies buying technology or e-commerce companies.
The first steps of the M&A process involve creating a list of potential companies to target, conducting high-level meetings with each to examine how they can strategically work together and preparing for due diligence. The next step is negotiating and completing a deal. Depending on the transaction the buyer’s company could be paid in cash or stock.
The sale of a business is completed when all closing conditions are met and both parties sign the sale agreement. Antitrust authorities will look into the transaction during the M&A to ensure that it does not create monopolies in specific markets. After the acquirer has passed an antitrust audit it is now able to officially end the acquisition and transfer ownership of the company that was targeted to the buyer.
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