The merger and acquisition (M&A) process is not a straightforward or simple venture. There are varying types of mergers and acquisitions, and extensive planning and due diligence are required to ensure that the long-term impacts and return on investment (ROI) align with a company and business owner’s goals.
For companies with in-house experts in corporate finance, mergers and acquisitions can be outlined and orchestrated efficiently and with relative ease. However, for smaller businesses that do not have these expert internal resources, a partner like Saddock Wealth can provide the expertise and experience required to make the M&A process successful.
In the meantime, it is helpful to understand the strategic considerations in merger and acquisition opportunities and how to get an initial sense of the best path forward.
What is Mergers and Acquisitions (M&As)?
Mergers and acquisitions (M&As) are the various ways that companies are combined. This can be a combination of two entire companies or a consolidation of significant business assets. Essentially, in M&As, a company may expand by:
- Purchasing and absorbing another company in its entirety.
- Merging with another company to create a brand-new venture.
- Acquiring some of the major assets of another company.
- Making a tender offer for another company’s stock.
- Staging a hostile takeover.
Strategic Planning in Mergers and Acquisitions
When it comes to the early stages of mergers and acquisitions, the first step is to outline what you hope the endeavor will achieve. Before moving forward, consider the following questions:
- What is my primary goal for considering a merger and acquisition?
- What is the value I am trying to create through an M&A?
- What are the traits and characteristics that I am looking for in a target company for an M&A?
- What is my timeline for completing an M&A?
- Who are my partners and resources, and what are their roles in the M&A process?
- How will I determine the value of another company and the ROI?
- Do I have the right technology, systems, and resources in place to make accurate calculations when it comes to determining the value and ROI?
The answers to these questions will help you develop a concrete plan and identify any areas that need to be addressed before the M&A process can begin in earnest.
How Mergers Are Structured
There are different ways to structure an imminent merger, and these varying scenarios should be thoughtfully considered early in the M&A process. Based on the relationship of the two companies that are involved in the M&A, mergers can be structured in any of the following ways:
- Horizontal mergers – When two companies are in direct competition and share similar products or services, and similar markets.
- Vertical mergers – When two companies are in different areas of the supply chain, they combine to be more effective and profitable.
- Congenic mergers –When two companies serve the same consumer base but in different ways.
- Conglomerate mergers – When two companies have two entirely different business activities that are not related to each other.
- Market-extension mergers – When two companies sell similar or identical products or services, but in different markets.
- Product-extension mergers – When two companies sell different but nevertheless somewhat related products or services in the same market.
How Are Mergers Different from Acquisitions?
Keep in mind that the above list focuses on mergers. Moreover, M&A is the most common term for combining two companies. There are some inherent differences between mergers and acquisitions.
In simplest terms, an acquisition describes a transaction in which one company absorbs another through a takeover. However, a merger occurs when two companies mutually combine to form an entirely new entity.
Furthermore, many factors will determine the best way for your unique organization to approach the M&A process. That is why it is best to start with an initial consideration of these options – and how they can best help you achieve your goals – should always be your first step.
The Best Way Forward is with Saddock Wealth
If you are considering an M&A but do not have the deep pockets or internal resources to set the stage for the process ahead, Saddock Wealth can help.
Reach out to our M&A specialists today to start the conversation. Together we can outline your long-term ambitions and the best M&A opportunities available now and in the future. With an expert resource like Saddock Wealth leading the way, you can ensure that all your upcoming ventures align with your business goals and measurements for future success.