The Merger and Acquisition Market

The merger and acquisitions market is among the corporate finance’s most exciting find more and lucrative markets. Although it’s not a strategy every company can pursue, for those that are able to make it work, M&A can create tremendous growth potential. M&A transactions can be complex and require careful planning and execution in order to be successful. The M&A process begins with a preliminary assessment of the company. This could include discussions at a high level between vendors and buyers to see how the two companies strategically fit together.

After the initial assessment is completed, the acquirer could make a preliminary offer to the company it wants to acquire. Based on the circumstances the offer can be made via an outright purchase or tender offer. A company may purchase all the shares of a business in an outright acquisition. This bypasses the targeted company’s board of directors and management and is typically completed for more than the shares were worth prior to being acquired.

A tender offer allows an publicly traded company to contact the shareholders of a publicly-owned company and offer to purchase their shares at a price agreed upon by both parties. This is a hostile acquisition that requires shareholders of the company to be in agreement with the transaction before it is completed.

The potential to create cost and revenue synergies through the merger of two businesses is the primary reason behind companies to consider M&A. For instance, if a car company purchases a manufacturer of seat belts, they can realize economies of scale and reduce the cost per unit as production increases. M&A is also utilized by companies to access technologies that would be costly or time-consuming to develop on their own.