Mergers and acquisitions represent attractive opportunities for expansion for businesses to achieve long-term growth objectives. Important drivers of M&As include scale economies, increased revenue or market share, cross selling, synergies, diversification, resource transfer, vertical integration, and more. They are also used to rebalance the corporate business portfolio to extract significant value. It is a known fact, however, that half of M&As fail to deliver on their promise.
Despite their performance, acquisitions remain part of corporate strategy. That is because growth through acquisition has been vital to the success of many companies operating in today’s economy. Most CEOs realize that their companies cannot succeed without making acquisitions. Not every company can win market share away, particularly in mature industries, so acquisitions fill in the gap. Acquiring is much faster than organic growth, and speed is unquestionably essential in today’s economy.
M&A strategy goes a long way to improve the odds of success of the deal. M&A strategy concerns aligning the firm’s strategic goals with the process of generating M&A transactions. The core logic is that transactions should be conducted only if they improve the strategic position of the investing firm. Therefore, M&A strategy probes the strategic rationale and the validity of the transaction.
WHAT WE DO
Industry Analysis: Examination of the industry and its value drivers, including strategic implications of its geographic span (global, regional, local), level of consolidation, life cycle stage; value chain and margins; market size, growth, and elasticity of demand; competitive forces, level of internal rivalry, profitability drivers, and identification of major strategic groups.
M&A Strategy: Determination of business growth through acquisitions that build competitive advantage. The strategic rationale may include improving the target company’s performance, consolidating markets to retire excess industry capacity, providing market access for small companies, gaining technologies or skills, or taking advantage of growth opportunities.
Exit Strategy Formulation: A planned approach to maximize the benefit of exit, including examination of strategic company position (industry, market, cost, competitor), identification of strategic buyers, analysis of strategic fit and rationale for acquisition, quantification of potential synergies, and preliminary valuation.