M&A is a complex business procedure and represents a major change in corporate strategy. It can yield positive growth and returns on investment however, it can also be disastrous if the strategy is not well thought-out and implemented.
Purchasing another company allows you to increase your market share by bringing in new customers and generating more revenue. Choosing the right company however, is essential to your success. Many times the result of a quick purchase is in a failure to integrate which is costly for the acquirer and the customer base of the acquired company.
Many M&A deals are horizontal, which involves combining rivals from the same sector. Cross-sector convergence has also become popular in the retail industry, such as companies buying technology companies or e-commerce firms.
The initial steps of the M&A process are to create an inventory 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 to negotiate and finalizing a deal. The company buying the acquisition may pay in cash or stock depending on the deal.
The sale of a company is completed when all closing conditions are met and both parties sign the sale agreement. During the M&A process the antitrust authorities will examine the transaction to make sure it doesn’t create a monopoly in specific markets. After the acquirer has successfully passed the antitrust examination it is able to end the acquisition and transfer ownership of the target to the buyer.