An M&A deal is one of the most popular types of business deals. The abbreviation stands for “Mergers and Acquisitions”, which means fusion and takeover. M&A is a set of tasks aimed at smoothly merging a company with another or multiple companies into one company. Such transactions can be signed for the most diverse purposes – to increase an existing company, open new branches in other cities or countries, it is better to optimize production. Most often this helps to solve such a problem as a bad system of delivery of the product to the consumer, for example, when increasing the volume of production of goods. There are different types of M&A:
These types of mergers and acquisitions take place between companies that make the same products. This task is performed to increase the volume of production and sales of goods in new areas. Often this task is performed to “drive out” regional competitors from the market, which may eventually grow into a larger company. For example, a large chain of stores operates in several regions of the capital. They sell sporting goods, but to expand their business, they buy a big deal from another company. After that, the company changes the sign, implements new labor standards, rebrands and launches the same store with the same product (or adds its own products to the range). Thus, the company does not have to start from scratch, look for customers and search for its niche in the market.
Acquisition and merger process involving companies with similar but not identical fields of activity. For example, a dairy company decides to purchase milk packaging equipment. This will be beneficial for the company as it does not have to depend on supplies and suppliers. In addition, since the cost of goods is lower, the cost of the final product can be reduced.
Absorption takes place between companies involved in the same process in different places. For example, a coal mining company as well as an associated company for its enrichment. This will also simplify the procedure as much as possible and reduce the cost of goods.
Conglomerates are a network of companies that deal in a wide variety of goods and services. Most of the time they are completely independent of each other. Examples would be the organizations of Elon Musk or Richard Branson. In one company, under the direction of one person, there are several enterprises – charity centers, marketing agencies, factories for the production of jet aircraft and more. This is very convenient, because in the event of the closure of a company, the main company will not suffer significant losses, but will remain in the market.
How Can The Process For M&A Transactions Be Simplified?
If you conduct an M&A transaction without proper preparation or insufficient control over the process, the merger can cause you a multitude of problems. To get the maximum benefit, small mistakes must be avoided. We recommend you to use data room solutions. Of course, after buying another company, the manager may face a negative reaction from the team. They may not understand or accept the new management system or support your company’s policies. Do not ignore the problem, because employees can do their job poorly, and you will only notice the result after a few months, when losses exceed income. Use different ways of communicating with the team – psychological approaches, retraining specialists and even dismissing people who cannot do their job. Understand business fundamentals. The executives of large companies today will not be able to function fully in the market without a basic understanding of the business. And doing business without this knowledge leads to potential partners being able to make the contract more profitable for themselves. The issue of the purchased brand after the merger. Often one company will buy another that is more popular and has a “loud” brand. Then you have to make a decision – leave it or replace it with your own. When performing a horizontal merger method, it is better to replace the company name with your own, and vice versa for a vertical one. In the second option, you were not competitors, and another company’s work area is slightly different, so most likely it already has some reputation and regular customers. An M&A deal is a great opportunity to expand your company, get partners and expand your business.