5 Pointers on Transacting a Successful Merger and Acquisition
Mergers and Acquisitions (M&A) are popular ways to expand your business. The majority of businesses consider organic expansion a slow process. They consider M&A as a feasible option for ensuring quick growth of their business. From a strategic point of view, mergers and acquisitions give your business the scope to improve its competitive position in the market.
Interested in learning more about Mergers and Acquisitions ? Here are a couple of ideas to help you better understand M&A:
1. What is M&A?
A merger is the process of uniting two business entities into one single entity. On the other hand, Acquisitions occur when one company gains ownership of the other’s assets and stock. Mergers place a business entity under the indirect ownership of the shareholder’s of the other business entity. While acquisition gives each party’s shareholders a partial ownership over the combined business entity.
2. Consider the Advantages of Both
Before going into a Merger and Acquisition, the individual companies must have clearly defined strategies for their businesses. It is important for the executives to consider the potential alternatives such as licenses, partners, and other options. After considering these choices, they can conclude whether the specific M&A is a feasible option or not.
3. Motivations for M&A
Companies opt for mergers and acquisitions for two reasons-
- For filling any existing gap in the products, capabilities, and resources of the company. A company might feel that its profits are affected because of failing product quality and non-availability of resources. In such cases, M&A is a good option for growing the business.
- For helping a company enter a new market. While entering a new market, a company faces tough competition from existing players. It is a bit difficult to create a niche with a completely new brand. However, this becomes easy if that company merges with an existing company in that market. In this way, gaining market share becomes much easier.
4. Identifying Value is Important
It is important for the acquirer to identify the value driver of the deal to maximize its effects. The value driver can be anything – brand, employees, property. The idea is to identify the resources that are valuable and then leverage them to reap the maximum benefits.
5. Documentation of M&A
The process of Mergers and Acquisition starts with a letter of intent. This letter binds both the parties with obligations to maintain confidentiality. Following this, a due diligence process is initiated that involves lawyers, tax advisers, and accountants. This also involves both of the parties. Once this process is completed, both business entities proceed to create a merger agreement and asset agreement. This, however, depends on the structure of the transaction.
We hope that these points are helpful for you to understand the nature and scope of mergers and acquisitions. Do you own a transportation company? Are you searching for mergers and acquisitions consultants? Then your search ends here. We hold a 100% success rate when it comes to Mergers and Acquisitions. We have a comprehensive road map to successfully guide business owners and investors through the process of M&A. For more information, give us a call today at (800) 913-5467.