In the world of business, not a day seems to go by without one business acquiring or merging with another business. This makes sense, because merger and acquisition services can be used both as a growth strategy and as an exit strategy, depending on who is doing the acquiring. However, it is quite common for mergers and acquisitions (M&As) to go quite horribly wrong. This is mainly because they don’t understand some of the key points behind M&As.
Why Have M&As at All?
In most cases, an M&A is done because it gives a company more of a competitive edge, and a greater financial wellbeing. Specifically:
- It realizes shareholders’ value. When successfully completing an M&A, the value of their shares will increase.
- It broadens the markets, as the companies join forces and share their customer database.
- It makes companies more efficient, because larger parts of the overall supply chain can be controlled by a single entity.
- It creates greater access to resources, including raw materials, finances, intellect, and skills.
- It allows for better risk management because the business diversifies and has greater choice in terms of supply chain.
- It increases listing potential, because profitability and turnover increases.
- It follows political necessities because legal requirements are different in different countries. This only happens in international M&As.
- It creates speculative possibilities, often because the acquiring companies want to sell or strip the portions at a later stage.
- It increases facilities, services, and products, thereby making a business more competitive overall.
How to Make an M&A More Likely to Succeed
M&As are risky operations that can have a massive payoff if they are successful, or they can run two businesses in the ground if they are not successful. This means that you need to learn how to increase the chance of being successful, which is done by planning things properly, by working alongside proven methodologies, and by seeing the entire endeavor as a project that has to be project managed as such. Specifically, you need to think about:
- Your strategy.
- Having due diligence.
- Being in synergy with everybody.
- Keeping the costs realistic.
- Having the right expectations.
- Focusing on transparency across the board.
- Having the right systems in place.
- Making sure interest stays high.
- Keeping your eye on the ball.
- Focusing on change management.
- Working together with trusted advisor.
Whether or not your M&A will be a successful depends on a huge range of factors. You won’t be the first to try and fail, pick yourself back up again, and try again. You also won’t be the first that is hugely successful and turns two companies into the one next big thing. But if you are to be successful, you have to, as much as possible, eliminate any possibilities of failure. You need to take it seriously, be innovative in all your approaches, and work together with people who can guide you through the process properly.