M&A is a very complex business process that requires a significant change in corporate strategies. It can lead to positive growth and higher returns on investment, or it can be disastrous if the strategy is not well thought out and implemented.
When you buy another company, you can increase your market share by reaching out to new customers, and increase revenues. Choosing the right company however, is essential to your success. Too many times the result of a quick purchase is in a faulty integration that is costly for both the acquirer as well as the customer base of the acquired company.
Many M&A deals are horizontal, which involves combining rivals from the same industry. Cross-sector consolidation is also a common and involves retail companies buying tech companies or ecommerce businesses.
The first steps of the M&A process involve creating an outline of potential target companies, conducting high-level conversations 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 buyer may pay in stock or cash subject to the terms of the transaction.
The sale of a business is completed when all closing conditions are fulfilled and both parties sign the sales agreement. Antitrust authorities will scrutinize the transaction during the M&A to ensure that it doesn’t create an monopoly on specific markets. Once the acquiring company has passed an antitrust audit and is able to officially close the acquisition and transfer ownership of the company they are targeting to the buyer.