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Mergers and acquisitions are one of the most significant corporate changes companies can make. The transformative outcomes of a successful deal may change a company’s future, and the risks that could result keep executives awake at late at night. Making companies more cohesive through divestitures and mergers or breaking them apart by spinoffs and separations is a difficult task that requires expert guidance.
M&A services include due-diligence, screening, providing advice on valuations to ensure you don’t pay too much and so on. The most reputable management consulting and advisory firms have teams dedicated helping clients to identify the right opportunities, and to develop the acquisition strategy to achieve their goals.
There are a myriad of kinds of M&A transactions, ranging from strategic to opportunity-based. A “targeted acquisition” is usually done by a large, established company that has corporate development (corp dev) team that is looking for small, promising companies to help their growth strategies. This is the type of M&A that is typically encountered in tech start-ups which isn’t easy to grow.
Horizontal M&A involves companies that are in the same industry and can benefit from synergies. eBay and PayPal are two mergers in which both companies merged their customer bases and reduced operational expenses. Vertical M&A is when a business acquires a business that offers complementary products or services. Combining strengths is a way to boost the market share and revenue.
A true merger unites two separate companies into an entity that is legally distinct, creating a business with the same name and operating as before. Stock sales are a viable alternative to a merger, where the buyer purchases all outstanding shares directly from the shareholders of the target business. This is less complex than a full-blown merger, however it may violate antiassignment provisions in existing contracts. It also requires third party consent.