What is an M&A Strategy?
A strategy for a merger or acquisition is the rationale behind the transaction. Your objective should determine the type of deal that is right for your company. Maybe there is even more than one objective. Commonly, these goals are focused on boosting financial performance and mitigating risk.
Common M&A Strategies
There are many reasons for M&A deals, but they are usually financially motivated. Some of the more common causes include:
Expanding Capabilities: A company may seek to improve its offering of core competencies via an M&A deal. This can include expanded R&D opportunities to gain innovations, or achieve stronger manufacturing operations, or even merge to lower manufacturing costs. In addition, some capabilities are easier and faster to purchase than trying to build them from scratch.
Expanding Into New Markets: Companies will often use M&A as a strategy to expand their offering to new customers in new geographical markets. Cross-border M&A is a common effective strategy for this. Learn about how your company can benefit from cross-border M&A here.
Gaining a Competitive Edge: A merger can facilitate the creation of a better distribution or marketing operation by allowing a business to expand into the markets of a similar company. The newly formed network of a merger instantly gives both companies a more extensive customer base. In an acquisition, the purchasing company instantly gains the selling company's network.
Diversifying: Another reason that companies choose to merge is to complement an existing product or service. When two businesses join forces, their products or services can gain a competitive edge in their particular market.
Eliminating Excess Capacity: When a company buys out another company within its sector, it can better maintain production capacity and reduce it if necessary.
Speeding Up Time to Market: Smaller, younger companies sometimes don't have the resources to market their product or service as quickly as they would like. A more established company can take over the smaller one and get a promising product to market much faster through their experience, resources, and more significant sales force.
Replacing Leadership: If the owner of a private company wishes to exit the business for retirement or other reasons, but no one in the company is willing or able to succeed them, then a merger or acquisition can effectively solve the problem.
Cutting Costs: Combining two companies that have similar products or services can create an enormous opportunity to lower costs. Such cost-cutting strategies can be accomplished by combining locations or streamlining support functions, improving economies of scale.
Survival: Sometimes, an M&A strategy is simply the only way a company can survive, especially during economic downturns, such as the global financial crisis of 2008 to 2012.
M&A deals can take place for other reasons, as well, but these are among of the most common. Companies can even have more than one of these reasons for joining forces. If you would like to learn more about the M&A process, read an overview of the steps involved, so you know what to expect.
If you are considering selling your business, our M&A professionals at Benchmark International would love to hear from you and discuss how we can help you make the most intelligent move with your company.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntI.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL:
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $8.25B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 14 offices across the world, have assisted thousands of owners with achieving their personal objectives and ensuring the continued growth of their businesses.