Mergers and Acquisitions: Core Concepts

M&A Fundamentals: Your Deal Checklist

Considering a merger or acquisition? Understand the basics before diving in.

1. Merge or Acquire?

• Merger: Two companies of roughly equal size combine to form a NEW entity.
• Acquisition: One company BUYS another.
• Why: Different legal and financial implications.

2. Why Do Deals Happen? (Strategic Motivations)

• Synergy: Is 1+1 going to be greater than 2? (Cost savings from combining, or more revenue from cross-selling).
• Growth: Faster expansion into new markets or product lines.
• Capabilities: Acquiring new tech, patents, or talent.
• Market Power: Reducing competition.

3. Types of Mergers (Industry Relationship):

• Horizontal: Competitors merge (e.g., two airlines).
• Vertical: Buying a supplier or customer (e.g., car maker buys a tire company).
• Conglomerate: Unrelated businesses (e.g., tech buys food).

4. Where Deals Go Wrong (The #1 Challenge):

• Post-Merger Integration (PMI): Combining cultures, IT systems, processes, and people. This is where most synergies are lost or realized.
• Cultural Clashes: Merging different ways of working.
• Loss of Talent: Key people leave.
• Overpayment: Buying a company for too much.

Golden Rule: M&A is a tool for strategic growth, but its success hinges less on the deal structure and more on the meticulous execution of post-merger integration.