All you need to know about Mergers and Acquisitions
A business acquisition is when one company buys all or most of another company’s shares. It’s a common business practice that can be beneficial for both parties. There have been plenty of large-scale acquisitions that have made the news; Elon Musk made headlines all over the world for his potential acquisition of Twitter earlier this year. Indeed, the total value of mergers and acquisitions (M&A) of UK companies made by foreign companies totalled a massive £11 billion in Quarter 4 of 2021.
If you’re planning on undergoing an M&A, make sure you know the processes involved and the benefits you can expect, as highlighted below.
Types of business acquisitions
Business acquisitions are split into four main categories:
- Vertical Acquisition: when a company acquires another company that is higher or lower in the manufacturing process to make them more independent from market trends and vendors.
- Horizontal Acquisition: when a company acquires another company in the same industry to eliminate competition.
- Conglomerate Acquisition: when a company acquires another company in a completely different industry to safeguard against fluctuations in the market.
- Market Extension Acquisitions: when a company acquires another company in the same industry, but they are not in the same market, to have an international presence and absorb competition.
Different mergers offer different benefits; some companies might want to beat the competition by buying them out, and some may want support from a larger company to keep running. Whatever your reason for an M&A, seek expert legal advice to choose the right model for you.
The steps involved in a successful business acquisition
The steps you need to take for a successful M&A depend on whether you are a buyer or seller. If you’re a buyer, establish your strategy and goals, open up a line of communication with the seller about what you want from the deal, investigate the seller’s state of affairs and negotiate a deal through your solicitor.
If you’re looking to sell, establish your goals with other board members and what amount you wish to sell for, gather your documents for your prospective buyers, locate a buyer then negotiate and finalise a deal.
Whichever side you’re on, make sure you understand corporate structures so you know with whom to negotiate, make the M&A clear to key personnel who will be managing the negotiation process, unify the team with concrete goals and choose a strong leadership team to be the face of your company. When it comes to M&A deals, you want your best negotiators and business minds at the front and centre.
