Before pursuing a merger or acquisition (M&A), there must be some reflection on how a business intends to leverage an M&A to meet its business objectives. Merger and acquisition strategy allows a business to set a group of parameters to consider and assess to identify M&A opportunities and then determine the viability and value creation potential of any deal.
While mergers and acquisitions in business can be used to achieve different outcomes, they both have the potential to change the growth trajectory of any organization. Before pursuing an M&A deal, it is important for business leaders to understand what they are looking for and why it is integral in helping their business reach its ultimate goals. This can often be clarified by defining what the key business drivers are and then identifying approaches that align and enhance those drivers. With that in mind, here are some common objectives that businesses may use an M&A strategy to achieve:
A solid mergers and acquisitions strategy requires a deep understanding of the industry each business is in. An objective view must be taken regarding where a business is positioned within the industry, and having an accurate perception of its competitive advantages and deficiencies is important. That realistic assessment can be combined with a similar analysis of a business’ competitors as well as all key players in the industry. Once these businesses have been appropriately assessed, it becomes easier to see where pieces of the puzzle may interlink seamlessly.
Mergers and acquisition deals that end up being successful are often forward-looking and aim to foresee the needs of the market before they are fully realized. Having a pulse on the industry landscape through the lens of anticipated opportunities, trends, and evolving technologies can play an important role in any M&A strategy. As mixed as it may be, customer feedback can be a highly valuable resource that can both provide clues to future market needs as well as shortcomings of a current service that could be improved.
A complete strategy should also take into account the integration process and needs to be approved by key stakeholders on both sides of the transaction. In addition to company executives, lawyers, bankers, consultants, or special firms may be included in the decision-making process to advise on their areas of expertise regarding a strategic acquisition. While due diligence team members will have done extensive research on the target company, how the post-M&A integration and restructuring plans will be managed from every standpoint (financial, operational, cultural, personal, etc.) will need to be considered.
In some cases, mergers and acquisitions may not align with a business strategy or long-term goals. While M&A can be an incredible method to spark growth in a company, they do not make sense in every scenario and are naturally accompanied by varying levels of risk. Fortunately, there are strategic alternatives that companies can consider outside of a merger or acquisition in business.
A mergers and acquisitions business strategy are essential when considering significant (inorganic) growth and expansion options. The due diligence process will help determine whether a specific M&A deal is worth proceeding with. However, an upfront strategy will help identify viable candidates (target companies) and ensure that the right questions are being asked during the due diligence phase. Although mergers and acquisitions are a powerful approach to helping a business achieve its ultimate goals, the process is always complicated, unique, and comes with risk factors. M&A alternatives can help drive growth at smaller scales if the right opportunity for an M&A has yet to present itself.