FAQ - Mergers & Acquisitions
- What is the procedure for acquisition and merger for companies?
Mergers and Acquisitions (M&A) are ways of strategic management, where consolidation of two companies or their individual assets is resulted. In general, the most common goal of all mergers and acquisitions (regardless of their structures or categories) is synergy generation; and thus, success of any merger or acquisition is decided by the fact that whether the desired synergy is achieved or not. This synergy is nothing but enhancement of certain capabilities of the consolidated company and achieving specific advantages, which were not accessible by the individual companies prior to merger or acquisition. This strategic management for synergy generation could be for achieving one or more of the following objectives:
- Wealth and profit maximization,
- Lowering the overall cost of production,
- Getting new technologies,
- Beating market competitions,
- Business diversification,
- Greater market size
- And share and increasing or fortifying the well-established reputation and reliability of one's company.
Here, it may also be just mentioned that, a merger is the combination of two individual companies to form a new bigger or better company (also termed as Amalgamation); while an acquisition is the case where a company is taken over by another company for achieving the targeted synergy value. The paragraphs below, describe the generalized procedure for mergers and acquisitions (M&A), to help the companies concerned.In general, for any M&A, the following processes or stages are covered by the entire consolidation procedure:
- Self-Assessment and Overall Review: The very first step towards M&A is honest, accurate, and unbiased self-assessment (approximated undervaluation is often safer) of one's company and its present assets and capabilities. The need for any merger or acquisition too is to be justified; stating the exact requirements for company's growth. Then, chalking out the growth plan will be the next task in this phase.
- Searching and Screening Target Companies: The company desirous of a merger or an acquisition, is then required to look for the suitable companies which could fit into the strategic adjustment for the desired type of synergy. Intentions and capabilities/resources of the target companies are to be seen, discussed, and verified. Lastly, shortlisting is to be made, to select the most appropriately suited and beneficial company.
- Due Diligence related with Target Company: After primary screening of the most suitable company (agreed to merger or acquisition), then a detailed investigation, valuation, and analysis of the capabilities and present status of the target company are to be performed. This task is to be carried out with expert and efficient support of corporate lawyers, chartered accountants, tax advisors, IT professionals, and other necessary professionals. After completion of this due diligence, the two parties may then proceed to draft a consolidation agreement depending upon the structure of the corporation and transaction, such as 'merger agreement', or 'share purchase agreement', or the 'asset purchase agreement'.
- Negotiations for A Common Consensus: The main aims of these discussions and negotiations will be coming to a mutually-agreed and common consensus, in order to work together for meeting the targeted goals; timeline may also be decided.
- Post M&A Integration: After mutually-consented and successful completion of all above steps or phases, the two participating companies in the M&A, now can make a formal and official announcement regarding the merger or acquisition brought about.