Merger & Acquisition Advisory
OUR
CAPABILITIES
Corporate strategy
We can help you identify the right strategic fit for your business by evaluating why, where, and when investments should be made to align with your objectives. Our expertise can help you make informed decisions that will lead to increased success.
Divestitures & carve- outs
We will develop a plan to support you in achieving your goals for divesting. This plan will include strategies for growth and expansion, as well as for finding and cultivating new opportunities. We will work with you to optimize the process and ensure that everything goes smoothly. With our help, you'll have the ability to reach your divestiture goals.
Due diligence
Question assumptions. Our market, customer, competitor and technology insights can help guide you in your due diligence process to evaluate if the target is the right fit. We encourage critical thinking when reviewing the evidence; challenge yourself to identify potential risks, hidden opportunities, and unexpected outcomes.
Merger integration
We will ensure that you are able to fully capitalize on the synergies of your deal and maximize the potential benefits for your organization. We will provide you with comprehensive guidance and support every step of the way, so that you can move forward with confidence.
Target screening
We will evaluate potential candidates and their key business drivers to help you determine the best deal for your needs.
Analytics
By leveraging advanced analytics, we are able to gain actionable insights that can help to drive performance, streamline the M&A deal cycle, and enhance decision making. These insights can help to identify potential opportunities, identify areas for improvement, and optimize processes for maximum efficiency.
MERGERS & ACQUISITIONS
(M&A) PROCESS
MERGERS & ACQUISITIONS
(M&A) GUIDEBOOK
Types of Merger and Acquisition
What Is Mergers And Acquisitions (M&A)?
Which Type of M&A Is Right for You?
What is a Merger?
Understanding Mergers and Acquisitions (M&A)
What is the Motive for Merger?
Types of Mergers and Acquisitions (M&A) Transactions
How Does a Merger Work?
How Are Merger and Acquisitions Financed?
What are the Advantages and Disadvantages of Merger
Valuation of Merger and Acquisitions
What is an Acquisition?
Motives for Merger and Acquisitions
What is the Motive for Acquisition?
Is Rebranding Necessary?
How Does an Acquisition Work?
Steps involved in Merger and Acquisitions
What are the Advantages and Disadvantages of an Acquisition?
Impact of Mergers and Acquisitions
Difference Between Merger and Acquisition
Mergers and acquisitions (M&A) refer to the process of combining two companies into one, either through a merger process where both companies combine to form a single entity, or an acquisition process where one company purchases the other and incorporates it into its business. These transactions can involve any type of agreement between two companies.
Let's have a look at these two terms, merger and acquisition, separately.
MERGERS
A merger is a process where two or more entities, such as companies, organizations, or governments, join together to form a single new entity. The resulting entity is typically larger than any of the entities that preceded it, and it is typically formed for the purpose of increasing efficiency, expanding its reach, or gaining a competitive advantage.
Mergers in the corporate world are often driven by a desire to expand into new markets, increase the size and scope of the organization's goals, and gain a larger portion of the current market share.
It is the merging of two organizations on equal terms to form a single, legal entity. The phrase "mergers of equivalents" is sometimes used to refer to when two organizations decide to combine and are generally equal in terms of measures, customers, and the scale of projects.
A corporate consolidation is the joining of two organizations into one, which frequently happens through a merger or acquisition. Through the consolidation, assets from both organizations are combined, and the new organization may have better market share, economies of scale, or other advantages.
Post-consolidation, the two entities combine to f orm a new entity. This new entity has its own distinct mission, vision, and strategies. It may also have new product offerings, services, and target markets. The new entity benefits from the combined resources of both entities and is able to better compete in the market due to increased size and capabilities.
Advantages
- By merging, elements contending in a similar market can gain a larger market share.
- Merger is often chosen by some organizations as it offers the benefit of economies of scale, resulting in a reduction in operational costs.
- Occasionally, merger outcomes in income development squeeze into the goal of some organizations that seek to achieve inorganic income growth.
- Merger allows organizations to quickly expand their operations to different geographies without the high costs associated with physical market entry.
Disadvantages
- In some cases, the rate of development for the newly combined element is slower than for the elements that were combined.
- The process of communication and collaboration between employees of different organizations can be complicated.
- This often leads to a more significant factor that could play a role in implementing a business model.
ACQUISITION
An acquisition is the process of one company purchasing most or all of another company's shares in order to gain control of it. This process involves the acquirer purchasing more than 50% of the target firm's stock and other assets.
An acquisition can take place with or without the target company's approval, but if it is approved there may be a no-shop clause in place during the process. Acquisitions are a common practice in business and are done to increase market share, acquire new technology and resources, expand geographically, or increase efficiency.
Acquiring another company can provide access to new technologies and intellectual property, as well as new sources of revenue. It can also help the parent company to expand into new markets and diversify its customer base. Finally, it can provide access to the other company's customer base and distribution channels, which can help the parent company to grow its business.
The best way to go about making an acquisition is to take a proactive approach. Start by clearly defining your company's long-term objectives. Then do research to identify those companies that could help you achieve those objectives. Once you've identified the companies that are the best fit for your goals, you can begin the process of making an acquisition. There are four main steps in acquisition process:
1. Select a team
A successful working group within a company requires clear communication and collaboration between representatives from all areas of the business. All members must be able to work together harmoniously to ensure the group's success.
2. Prepare a plan
What is the reason you took this decision? What is your main aim? What about financing the deal? Make a list of goals and ensure your plan is such that you meet at least one of it.
3. Decide your Price
Nailing down the value of an acquisition is difficult; however, there are certain steps you can take to ensure you get the most out of the deal. Hiring a qualified accountant is essential to understanding the financials of the acquisition, while a solicitor can help to ensure the contract is legally sound. Additionally, it is important to consider the potential need for additional funding and to plan accordingly.
4. Approach
If the potential target has an online presence, you can also use email or social media to make contact. Be sure to provide a clear and concise explanation of why you think your acquisition is the right move for them, and how it will benefit them in the long run.
Once you've made contact, it's time to negotiate. This can be a tricky process as you need to agree on a suitable price and other terms. It's important to remain realistic and flexible throughout the process, and to be open to compromise.
Finally, if you're successful in your negotiations, it's time to draw up the contracts. Take your time to go through all the details of the agreement and make sure you're both comfortable and happy with the terms. Once you've done this, it's time to finalize the deal and welcome your new acquisition.
Advantages
- Reduced entry barriers
- Market power
- New competencies and resources
- Access to experts
- Access to capital
- Fresh ideas and perspective
Disadvantages
- Culture clashes
- Duplication
- Conflicting objectives
- Poorly matched businesses
- Pressure on suppliers
- Brand damage
Difference Between Merger and Acquisition
M&A is a broad term encompassing all types of financial transactions in which one company acquires, merges with, or takes over another company. These transactions can range from a simple purchase of assets or shares to a complex series of transactions involving multiple companies.
The two terms are frequently used fungibly, but they take different meanings.
Types of Merger and Acquisition
Congeneric
The merger of Mobilink Telecom Inc. and Broadcom in 2002 is a perfect example of concentricity. It is permissible for the two entities, both of which are from the hardware business, to combine their respective expertise.
Market Extension
The merger of Eagle Bancshares Inc. and RBC Centura in 2002 shows the market expansion. It allowed RBC to expand its operations in the North American market.
Conglomerate
The merger of Walt Disney Co. and ABC Inc. in 1995 shows a conglomerate. Walt Disney had a stake in media outlets while ABC Inc. participated in the transmission broadcasting company.
Horizontal
The merger of Compaq and Hewlett-Packard (HP) in 2001 is an example of horizontal merger. This deal resulted in the formation of a world-leading innovation giant which was valued at over $87 billion.
Vertical
The merger of AOL and Time Warner in 2000 shows a vertical merger. Time Warner was involved in the data industry through CNN and Time Magazine, while AOL gathered data from the internet.
Are you looking to expand into new markets, explore new products and services, or gain more capital? Then a vertical merger may be the right choice. No matter what type of merger you choose, it's important to make sure that both companies' cultures and business operations are compatible. A well-thought-out M&A strategy will help you determine the right type of merger for your company.
If you are you looking to create new efficiencies and streamline your operations by joining with wholesalers or suppliers, then a vertical merger is what will help you in this.
Mergers and acquisitions can be powerful tools for companies looking to grow and expand, but it is important to ensure that the type of transaction chosen will best support the company's overall strategy. It is wise to consult an expert advisor to assess the pros and cons of different types of mergers and acquisitions before making a decision. Doing so can help to ensure that the company will be able to make the most of the new opportunities that arise from the transaction.
Understanding Mergers and Acquisitions (M&A)
Obliquely, a deal can be referred to as a "merger" when both CEOs mutually agree that coming together is the most beneficial option for both companies. An example of this is Facebook's acquisition of mobile messaging service WhatsApp for $19 billion.
Hostile takeovers are generally seen as acquisitions, though the distinction is that the target company in this case does not wish to be acquired. A notable example of this is when Vodafone acquired Mannesmann AG in 1999, paying a staggering $202.8 billion. In this case, Mannesmann AG had no choice but to accept the takeover and be acquired by Vodafone.
The company that is attempting to take over the target is referred to as the acquirer, while the company that is being taken over is known as the target.
Additionally, M&A provides an opportunity to diversify product lines, expand into new markets, and gain access to cutting-edge technologies. It also helps in improving overall financial performance and reducing debts. Furthermore, it can help achieve greater market share and brand recognition, thus gaining a competitive edge.
Despite the high cost and potential risks associated with mergers and acquisitions (M&A), many firms still choose to pursue them as a strategy for growth. Research has shown that approximately half of all M&A deals turn out to be unsuccessful, resulting in a negative impact on stock prices. Therefore, firms must carefully consider the potential return on investment before pursuing an M&A strategy.
Types of Mergers and Acquisitions (M&A) Transactions
The top transactions covered under the category of M&A are:
Merger
Acquisition
Consolidation
Consolidation is a business restructuring process that combines two or more companies into a single entity. This process is typically done in order to reduce costs, increase efficiency, and create a stronger entity that is better positioned to compete in the marketplace.
The new entity usually has a new name, and the assets, liabilities, and operations of the former companies are combined. For instance, Sandoz and Ciba Geigy, two Swiss pharmaceutical companies, merged to form Novartis.
How Are Merger and Acquisitions Financed?
In cash transactions, the buyer will provide the seller with a lump sum of money in exchange for the seller's business. This money is most commonly paid in the form of cash, but it can also take the form of bonds, promissory notes, or other forms of financing. This form of financing is often more expensive than stock swaps, as the buyer must put out more money up front.
Debt assumption is another way to finance an M&A deal. This involves the buyer taking over the seller's existing debt, instead of issuing new debt for the transaction. This can be beneficial for the buyer, as it allows them to avoid the costs associated with taking on new debt. However, it can also be risky, as the buyer must manage the existing debt and ensure that it is paid off on time.
Finally, an M&A deal can be financed by acquiring another business's assets. This involves the buyer purchasing the assets of the seller and using those assets as collateral for the transaction. This can be beneficial for the buyer, as it can provide them with a more secure form of financing. However, it can also be risky, as the buyer must ensure that the assets are properly managed and that they are able to recoup it.
Valuation of Merger and Acquisitions
Valuation involves analyzing the financials, market trends, and competitive landscape of the target company to determine its worth. The acquirer and target may use a variety of methods, such as discounted cash flow, comparable companies' analysis, and asset-based valuation, to determine the company's value. Ultimately, the parties negotiate a price that is fair for both sides.
Some of the methods used for valuation are:
Motives for Merger and Acquisitions
Unleashing Synergies
Synergy is when two companies join forces, combining their resources and expertise to create a greater whole than the sum of their parts. The improved efficiency and cost savings that come from combining the strengths of both companies can lead to increased profitability, improved market presence, and a stronger competitive edge. Synergy also results in enhanced customer service, accelerated innovation, and greater product variety.
High Growth
Mergers and Acquisitions (M&A) provide an opportunity for faster growth, as they enable firms to gain increased revenues through acquisition of another enterprise with the latest technology. This approach allows firms to acquire the technology without taking on the risk associated with developing it in-house.
Strong Market Power
Monopoly power can be generated by combining industry rivals through a variety of methods, such as mergers and acquisitions, joint ventures, or strategic alliances. By combining industry rivals, companies can increase their market share, expand their product and service offerings, and improve their cost structure, all of which can lead to greater monopoly power.
Diversification
Acquiring a non-cyclical or counter-cyclical company can help cyclical companies diversify and reduce their market risk.
Tax Benefits
In a Merger and Acquisition (M&A) transaction, the tax liability of one enterprise can be offset by the tax losses of another.
Is Rebranding Necessary?
Keeping both names and operating as one company: This strategy is used when the two companies have complementary strengths and both names have strong brand equity. For example, the merger between Citigroup and Travelers Group in 1998 saw the resulting company being known as Citigroup.
Merging two names: This is when two names are combined to create a new one. An example of this is the merger of Chase Manhattan Bank and J.P. Morgan & Co., which created JPMorgan Chase & Co.
Retaining one and discontinuing other: The other name is discontinued and all customers, assets, and liabilities are absorbed into the stronger brand. This strategy is used to increase brand visibility, customer loyalty and market share. It also helps to reduce costs by streamlining operations and eliminating redundancy.
Coming up with entirely new name: This is the most widely used way where the strategy is to create a new brand name. The best example of this is the merger of Bell Atlantic and GTE. The new company adopted the brand name "Verizon Communications" in order to reflect the combination of the two companies.
Steps involved in Merger and Acquisitions
1
Strategy Development
The first step in an M&A strategy is to define the goals of the deal. This should include the purpose of the acquisition, the target company, and the desired outcome. This helps to ensure that all parties are on the same page and have a shared understanding of the intended outcome.2
Target Identification
In the target identification phase, legal teams must conduct thorough research to identify potential target companies. They must assess the company's current situation, evaluate the legal, financial, and operational risks associated with the target, and consider the potential benefits of the transaction. Additionally, they must analyze the competition and industry trends to gain a better understanding of the target's market position. Through this process, legal teams can gain insight into the target's strengths and weaknesses, which will guide the due diligence process.3
Valuation Analysis
In order to properly evaluate and assess the target company's suitability in accordance with the M&A strategic plan, legal teams must have access to comprehensive data on the target's activities, customers, financials, products, and more. After the relevant entities are identified, it is necessary to determine whether they are in good standing and meet all applicable legal requirements. In case they are not, then this could be a deal breaker. Thus, it is crucial to assess whether the issues can be resolved and how long it will take to move forward.4
Negotiations
After valuation models of the target company have been created, your firm can submit an offer and proceed to the negotiation phase, during which terms will be discussed in greater detail.5
Conduct Due Diligence
The M&A due diligence process involves an extensive review of the target company's financial and operational documents, such as balance sheets, income statements, cash flow statements, contracts, leases, and loan agreements. Additionally, external sources, such as customers, suppliers, and competitors, are consulted. This allows buyers to gain a comprehensive understanding of the target company's current state and potential risks. Through the due diligence process, buyers can make more informed decisions and create a better M&A deal.6
Closing the Deal
Once all necessary filings have been made, the parties can move forward with the closing. The legal team will need to ensure that all documents necessary to complete the transaction are ready. This includes all signed contracts, loan documents, and stock certificates. The legal team will also ensure that the closing is executed in accordance with applicable laws and regulations. Finally, the legal team must ensure that the closing is properly recorded and that all related documents are filed in a timely manner.7
Restructuring and Financing
In order to ensure that the financing options explored during the M&A planning process are properly implemented, an independent director/manager, springing member, or special member may be appointed. These directors serve on the boards of the entities involved in the merger or acquisition in order to protect the assets of the corporation and make sure that the financing options discussed beforehand are properly executed. Furthermore, they can help to ensure that the purchase and sale agreement are finalized and that the deal is ultimately closed without any delays.8
Integration and Planning of Back-office
The operational side of integration is just as important. It involves the realignment of business processes, the transfer of assets, and the integration of data, applications, and technologies. It also includes the consolidation of employees, customers, and vendors.
Developing a clear and concise integration plan is essential for a successful merger or acquisition. It should include a timeline for each step of the process, a budget for activities, and milestones for completion. To maximize efficiency, businesses should consider leveraging existing resources and infrastructure.
Overall, the integration of an acquired company requires careful planning, patience, and collaboration. By following these steps, both parties can ensure a smooth transition and a successful outcome.
9
Compliance After Merger
Post-merger integration is an essential step that is often overlooked, yet it is vital in achieving the goal of a "business as usual" state. Furthermore, it is a determining factor in whether the merger is successful or not.10
Back to Business
After the merger is finalized, it is essential to regularly assess the success of the newly formed entity by conducting ongoing reviews to guarantee compliance with all relevant regulations.
Mergers and acquisitions bring a number of changes within the organization. The size of the organizations change, its stocks, shares and assets also change, even the ownership may also change due to the mergers and acquisitions. The mergers and acquisitions play a major role on the activities of the organizations. However, the impact of mergers and acquisitions varies from entity to entity; it depends upon the group of people who are being discussed here. The impact of mergers and acquisitions also depend on the structure of the deal.
Impact of Mergers and Acquisitions
The most obvious change that occurs due to a merger or acquisition is the change in the size of the organization. This could be in terms of the number of employees, the number of assets, the number of products or services, the number of markets served, and the number of financial resources. Therefore, the size of the organization changes significantly due to mergers and acquisitions.
Overall, mergers and acquisitions bring a variety of changes to an organization in terms of size, ownership, and financial resources. These changes may be beneficial or detrimental depending on the structure of the deal and the group of people involved. Therefore, it is important for organizations to analyze the potential impact of such a decision before proceeding with a merger or acquisition.
Mergers and acquisitions have possible impact on:
Employees
Management
Shareholders
Competition
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