All businesses intend to grow both horizontally, and vertically. In an ideal situation, this is achieved through organic growth, which means the company grows by finding more customers, increasing its reach, and more. This, however, takes years. What is now known is that, in order for businesses to experience very rapid growth, they need to consider mergers and acquisitions. It is, however, very rare for a merger to go completely right (acquisitions are slightly easier because the purchasing company effectively swallows the other one up). As a result, it is very important to work together with excellent merger and acquisition services providers who can help you be successful.
Understanding the Strategies
A lot of larger businesses are always looking for other companies that they can merge with or, more often, acquire. In fact, some businesses even have a full merger and acquisition team, whose sole responsibility it is to find businesses that may be of interest in a merger and acquisition (M&A). In fact, in some organization, they even have decision-making capabilities, meaning they can make M&As without even having to run it past an executive.
Of course, this type of scenario is only really possible in some of the world’s largest companies. Smaller companies have to make do with making complex financial projections themselves, often by working together with other specialists as much as possible to identify a potential target. This is also one of the reasons why M&As so often go wrong. A small company with relatively little capital behind it that tries to make an acquisition is unlikely to also have sufficient capital to pay for the complex financial services that come with making an acquisition, as well as all the other associated costs.
However, if it goes well, the process is actually reasonably straight forward:
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A victim is identified and considered in terms of how they will enable horizontal and vertical growth.
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Deal negotiations start. These can get very heated, and are not always successful. However, in an ideal situation, the company eventually agrees to an acquisition, or pushes for a merger. If not, then it is possible for a hostile takeover to take place, whereby the purchasing company effectively purchase a majority share in the company that they want to acquire.
Throughout steps one and two, financial professionals and investment bankers play a very important role. All these discussions, however, are 100% confidential. As a result, it can be very difficult to truly learn from them.
Reverse Acquisitions
In almost all cases, acquisitions happen when one company wants to grow by effectively swallowing up another company. However, there are situations where the opposite happens as well. For instance, if a businessperson is looking to retire, they may want their company to become noticed for a potential acquisition. Again, investment bankers and other financial professionals can help with this, ensuring that a good deal is made.
These strategies to help with a merger or acquisition will help you get started, but these deals are complex, and should always be left to the pros if they are to be successful.