What is M&A?

M&A is a complicated business procedure and represents a major change in corporate strategy. It can bring positive returns on investment and growth but board of directors it can also be disastrous when the strategy is not properly thought out and implemented.

When you buy another company, you can expand your market reach by reaching out to new customers and increasing revenues. The right company to purchase, but, is essential to your success. Many times, a hasty purchase results in a failed integration that is costly for the acquirer and the customer base of the acquired company.

Many M&A transactions involve either a horizontal merger (combining companies in the same industry) or vertical merger (extending supply chains). Cross-sector consolidation is also common and involves retail companies buying tech or ecommerce companies.

The first steps of the M&A process include creating an inventory of potential companies to acquire, conducting high-level conversations with each to explore how they strategically fit together and preparing for due diligence. The next step is to negotiate and finalizing a deal. Based on the deal the company that is buying it may pay in either cash or stock.

The sale of a company is finalized once all closing conditions are met and the parties sign an agreement for sale. During the M&A process, antitrust authorities will review the deal to ensure it doesn’t result in a market monopoly. After the acquiring company has completed the antitrust review, it can close the acquisition and transfer ownership of the target to the buyer.