Merger and Acquisition Strategy

What is a Merger and Acquisition Strategy?

Merger & Acquisition Strategy is the process undertaken in which one corporate buys, sells, or combine with the other corporate in order to achieve certain specific goals of the market or in order to attain rapid growth in the competitive market, taking into consideration different factors like market value of corporate’s stock, financial health of the both the companies, threats of both the companies, new opportunities that can arise along with market conditions.

Explanation

Generally, the bigger companies in the market hunt for smaller companies for the process of acquisition. There are different policies the companies have for the merger & acquisitions like the expansion of existing business, research, and development, etc. All these policies should be kept in mind while entering the M&A Strategy by both the companies. Failure to implement proper planning, study, and lack of strategies, also fails the Merger & Acquisition Strategy, and the resulting company formed cannot survive in the market for the long run. Hence, proper planning, understanding of the market as well as the business of both the companies, along with proper strategies, should be done well in advance before implementing Merger & Acquisition Strategies.

Merger and Acquisition Strategy

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Strategies of Mergers and Acquisition

  • The most crucial strategy of M&A is the hunting of the target company. Once the company has decided its target company for acquisition, it can plan further steps of the acquisition.
  • The next step is the thorough study of the business of the company to be purchased. The study of the expected business, its demand, future growth is also to be undertaken. It will also give the idea of risks that are involved in the acquisition or future business.
  • Next, the study of the market should be undertaken. It will give the idea of growth factors in the market. The company can also get the idea of future opportunities, trends in the market, and demands of the customers.
  • There should be the consent of both the companies, i.e., the acquiring company and the target company, taking part in the merger and acquisition before implementing the strategy.
  • Future Plans and strategies should also be studied like staff involving process, work environment, Work to be done by the staff by gathering knowledge and information.
  • Finally, there should be approval of shareholders, promoters of both the companies, management, and other key persons of both the companies and then the Merger & Acquisition deal should be finalized.

Example

The most common and famous example of Merger & Acquisition is Google and Android. Google is the master company in the IT industry and search engine, whereas Android was just a start-up company, struggling for its existence in the mobile phone market. Android was also not much known in the telecom or IT industry. Hence, Android was taken over by Google for $50 million. At that time, Microsoft was leading the market due to its products like Apple iPhone and windows mobile. After the acquisition of Android by Google, 54.5 Percent of U.S Smartphone Subscribers became the users of Google Android devices. The report was based on the May 2018 data.

In this example, the small company Android was taken over by large company Google in order to meet the Competitive edge, which was created by Windows from its products like iPhone and Windows Mobile.

Conclusion

Merger and acquisition strategy is preferred by many small as well as big companies to fight or survive in the competitive environment in the market. Loss-making companies or small companies always prefer to get merged with big companies in order to save themselves and stand in the market. If there is a lack of proper planning and strategies, the mergers and acquisition strategies get failed also. Hence, the thorough study and the proper analysis should be undertaken by both the companies to make the strategies successful without any failure.

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