A Detailed 2020 Guide On Business Mergers And Acquisitions

The commercial ecosystem has started this year with a bang as the entire business landscape around the world has changed drastically. The past few years have become a pivotal point for many different industries and investors have taken their portfolios to new heights due to this thriving landscape. Now small businesses actually have the potential of challenging and competing with established companies simply due to the changes in the global market. However, the most notable difference is the fact that mergers and acquisitions have reached their all-time high. This segment has actually grown into its very own market which has helped thousands of businesses grow at an exponential rate.  

What Are Mergers?

Business mergers and acquisitions are separate terms but they induce the same result which is the creation of a single larger company. In simple terms business mergers is the voluntary combination of two businesses into one single entity. These mergers can help increase market share, increase revenue channels or gain a valuable edge over competitors. The largest merger was when British telecom Vodafone Group signed a deal with German Mannesmann AG. This deal was closed at a staggering $180.95 billion and till date is the most expensive merger ever. A merger has the capacity of providing an array of different benefits. Some of the most common reasons behind mergers are mentioned below.

  • Improving overall finances
  • Increasing operational capacity
  • IP ownership expansion
  • Improving relationships externally
  • Improving overall production rate
  • Increasing revenue growth
  • Reducing operational costs

What Are Acquisitions?

An acquisition is different from mergers as the smaller company is bought out and often ceases to exist. There are many different types of acquisitions but generally they carry more negative connotation as the smaller company is bought out and they hand over complete operational control. This is exactly why so many companies refer to their acquisitions as mergers even though the deal may clearly be an outright acquisition. The buyers’ power is absolute and this type of transaction often involves a staggering amount of capital. The most renowned acquisition of last year is when Xerox acquired 3D printing company Vader Systems. Some of the most common reasons behind acquisitions are below.

  • To gain more market power
  • To eliminate any entry barriers
  • Access to more established resources
  • Access to more capital
  • Corporate restructuring

What is a Business Acquisition Plan?

A business acquisition plan is a detailed outline of the acquisition considerations and organizes the data into reusable research and analysis. This business acquisition plan will include the legal description of your business and should indicate that your commercial enterprise is about to purchase an operational business. This plan will also include the financial state of the business being acquired details such as financial history, legal business description, size and location. The business acquisition plan identifies the companies short and long term goals, it will also state how these goals are going to be achieved.

A business acquisition plan is quite challenging to draft and implement as there are so many different factors which come into play. This is exactly why so many companies invest in acquisition services as these companies will draft your acquisition plan with meticulous attention to detail. These services do not only includes the business acquisition plan but also includes the implementation of the plan. A business acquisition plan has a huge role to play in the whole process and can really define the trajectory of the acquisition. While an acquisition consultancy firm will stream line the entire process for you and has the capacity of helping your business avoid unnecessary costs and obtain the best result.  These services are also offered in the context of mergers and have now become a prerequisite to a successful merger or acquisition.

Factors you should consider before an acquisition or merger

Due to the high profile nature of such business ventures, there is a very high risk factor involved. Even if your company is buying a lucrative and successful business, there are many external and internal factors which can influence the outcome of your venture. Yes an acquisition or merger will definitely boost and solidify your company’s competitive position.

The fusion process of acquisitions and mergers can often be divided in two different parts. The first includes the pre transaction process which takes place before the acquisition actually begins. Various factors will influence the process and even microeconomic factors can influence the success of your acquisition. This is exactly why it is imperative that you consider the following factors to mitigate the risk associated with your acquisition or merger.

  • Choosing a suitable partner for the venture
  • The trust between each party involved
  • Due diligence on the valuation
  • Experience from previous mergers
  • Communication before the acquisition takes place
  • Strategic fit
  • Economical changes which can influence the demand or supply
  • Fluctuations in demand and supply
  • Legislation enabling the merger or the acquisition
  • Current state of the economy

To wrap up our guide on mergers and acquisitions

At the end of the day it boils down to how well your company implements the merger or acquisition process. Your management team will have to shift gears and operate in over drive if you want the acquisition to be successful as the process begins you will have to deal with a myriad of challenges. Your entire team should be on board including stake holders as this merger or acquisition has the capacity of changing the entire outlook of your company.

A high profile merger or acquisition can improve the overall good will of your company but it has to be executed with precision or it can ruin your enterprise. We would definitely recommend seeking the help of an acquisition company as these services are designed to ensure that their client’s mergers or acquisitions are a complete success. You will need all the help you can get.