What is Merger and Acquisition Strategies
Merger and acquisition strategies in the corporate world are needed when one company is aiming to grow its asset base and also expand its shareholding in the stock market. When two equal companies decide to come together, share resources and make one entity, we call it corporate merge but where one stronger or bigger company absorbs another smaller company to form one entity; this is referred to as acquisition.
There are some special steps that should be followed for a successful merger or acquisition process so that the two companies involved may experience the benefits of whole exercise. The process followed may greatly affect these expected benefits either positively or negatively. For a positive impact, the two separate entities must carefully weigh their options in order to maximize the benefits of that merger and acquisitions deal.
Successful Merger and Acquisition Strategies
The first step into a successful merger is preliminary business valuation. The interested company must first consider and establish the market value of the target company before the acquisition takes place. At this step, the target company is expecting to produce their audited current financial performance plus their estimated value in the future should they continue with the deal. You must do a thorough analysis of the target firm and know its market status, customer base, trends and publicity among other history information about the company. In addition, you need to know the products of the firm, capital needs, brand value and its organizational structure. Study the company in a way that you can answer any question about them more than just their bank statements.
After the interested company has fully satisfied every detail of the target company, they may make the decision whether to go ahead with the deal or not. If as the acquisition company you feel the company has potential to be merged, prepare merger and acquisition proposal to the target company but the document has an offer that is non – binding. This means that, you can withdraw from the deal or any other company with a better offer may overlook your proposal. This is where merger strategies and needed to ensure that your proposal meets the eye of the market and the target company.
The target company will receive the proposal, plus many other proposals from other interested entities and then review them one by one. If they like your proposal, they may agree in writing on the proposal and then they start and Exit Planning. This target firm having found a good proposal will recollect and find the right time to exit and hand over the sale to the absorbing company. They will consider all available options such as partial or full sale and then communicate to the interested party accordingly, do tax planning and evaluate reinvestment alternatives they may find.
The game ball is still in the target company’s hands and they will play it smart to achieve the highest sale. They will do a marketing process and focus on structuring their exit deal. The company can try as much as possible to find a good company with the best deal in the market that can close down their sale; they also reorganize their merger and acquisition strategies to ensure they get hold of a perfect deal out of the proposals.
A t this point, things are almost complete and the deal may be closed. The stage of integration ensures that the new joining firm will carry or adopt the same kind or rules and regulations in the new organization. It is expected that the joint venture does not affect either of the firms operations. They are expected to run normally until the full absorption is completed, that is why the same rules have to be applied strictly.
For a successful merger or acquisition, sound strategic planning is needed to ensure that the deal does not break off. To get the best working strategies, the interested company must consider what other mergers have gone through. Learn by example from previous mergers; see how they succeeded or how they failed. Look through every step of the successful merger and try to disintegrate their own strategies then you can see how to mend yours by avoid the mistakes those who failed made.
You have to do a thorough market survey in order to get ideas and golden rules that may be used as part of your merger strategies. Follow the steps of acquisition we have seen above and remember market analysis is important. Do the company analysis carefully to know their market performance and financial performance too of the target firm. Poorly performing firms may be a risk but can be a good deal if you realize their potential in the future.
Merger and Acquisition Strategies Performance
To know of the future performance of a company, you need to analyze their recent market trends to know of their future opportunities. A company with no future, even if it is performing well now may not be a good deal. The management of both firms must work together at this point to come up with proper integration strategies that will see them merge successfully.
The target firm will reciprocate the proposal and enter into a ‘tender offer’. Here, all its shares or part of the shares are bought by the other company with a fixed price. This is done according to the Securities and Exchange Commission rules and regulations about the limit of shares and declaration of the number of shares on offer. The total price is worked out by any assigned investment company and is agreed on by the company intending to buy them.
Negotiations are allowed especially on the terms and conditions offered by the company which intends to buy them. Shareholders are given a chance to contribute over the share price and offer their opinion. Lastly, the top management of both merging companies will work on the modalities to ensure that no one loses their jobs after the merger and acquisition has been completed and signed. In both cases, merger and acquisition strategies determine the success of the deal.