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Mergers and Acquisitions

Name – Shivaji Jagtap
Class – MCA III Year
Batch – 2019-2020

M&A strategy is using the process of mergers and acquisitions to expand your business. Leveraging M&A as a business growth strategy is wise since we currently live in a world where the economy and technology are ever-changing. This strategy, when executed correctly, can provide powerful results fairly quickly.

M&A has always been viewed as a crucial tool for companies to drive growth. Whether it is gaining access to a new market, technology, customer set or product, or simply adding complementary products and services, the role of M&A cannot be downplayed. A coherent M&A strategy strikes a balance where the right vision and strategic intent is clearly articulated, communicated, and executed at every step of the M&A lifecycle – whether in strategy mode, targeting/screening, valuation, diligence, execution, or value- realization stages.

A company’s M&A strategy should be a subset of its overall corporate growth strategy. This includes assessing the need to acquire or divest; how the M&A alternatives align with the company’s vision, objectives, and strategy to enhance its competitive advantage and management’s capacity and ability to execute an M&A strategy.

Every deal should be linked to strategic goals, such as:

  • Transferring core strengths to the target business(es)
  • Acquiring or expanding products or markets
  • Transferring skills to new or non-core business(es)
  • Consolidating products or markets consolidation
  • Building new capabilities.

It has become more important that a company’s M&A strategy and integration plan are in sync with the disruptive business models and the changing mechanics of value creation, like shifting customer demands, interaction models and the economic logic for transacting. In other words, companies need to transform their strategic business plans into a set of drivers, which the M&A strategy should address

The Importance Of 360-Degree Due Diligence:

Value creation in a deal depends on knowing the opportunity well before buying and buying at the right price. Understanding upsides and risks can help in making the right decision and create the maximum value on a deal. It can help a bidder bid higher for a desired asset with upside as well as help negotiate or even walk away from a deal with risks outside the comfort zone. Due diligence, the cornerstone of planning and execution of a deal, equips a bidder to develop his bidding strategy. Balancing integration between securing the new value (to make 1 + 1 > 2) and protecting the old (to ensure 1 + 1 =2) is imperative for continued success. The success of a deal is defined by the achievement of strategic, financial and operational objectives.

However, the integration process—an important lever to achieve these goals—often does not find adequate space in the priority calendars of dealmakers, thus resulting in less-than-optimum value realization.

To summarize, creating value through M&A is more ‘science’ than ‘art’. Well-thought-out target identification, comprehensive due diligence and structured integration processes are the critical elements that lead to value creation in deals. Poor integration planning, weak communication, and cultural clashes can ruin the best deals. Using M&A as a growth strategy can allow companies to grow faster than they would organically by entering new markets, thus eliminating or surprising competitors and acquiring talent and technology. When companies are prepared for the intricacies of M&A, specifically integration, they can leverage synergies for financial gain as well.