M&A

What are Mergers and Acquisitions?

While often used interchangeably, mergers and acquisitions have slightly different meanings.

• A merger occurs when two separate entities combine forces to create a new, single entity.
• An acquisition refers to the takeover of one entity by another. The acquired company ceases to exist, and its assets become part of the acquiring company.

Motivations for M&A

Companies engage in M&A for a variety of strategic reasons, including:

• Synergies: The concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts. This can come from cost savings (e.g., eliminating duplicate departments) or revenue enhancements (e.g., cross-selling products).
• Growth: Acquiring another company can be a faster way to grow than through organic expansion.
• Increasing Market Share: Buying a competitor can instantly increase a company's market share.
• Acquiring New Technology: A company might acquire a smaller firm to gain access to its technology or talent.

The M&A Process

The M&A process is complex and involves several stages, from developing a strategy and identifying potential targets, to conducting due diligence, negotiating the terms of the deal, and finally, integrating the two companies. The due diligence phase is particularly critical, as it involves a thorough investigation of the target company's financials, operations, and legal standing to identify any potential risks or liabilities.