The Merger and Acquisition Market

The Merger and Acquisition Market

The market for mergers and acquisitions is among corporate finance’s most exciting and lucrative markets. M&A is not a strategy that every company can adopt however for those that can, it could provide tremendous potential for growth. M&A transactions can be complicated and require careful planning and execution in order to be successful. The M&A process begins with a preliminary evaluation of the company. This could include discussions at a high level between vendors and buyers to determine how the find more companies can strategically work together.

Once the initial evaluation has been completed, the acquiring firm can make a preliminary offer to the company it wants to acquire. Based on the circumstances, this can be done either through an outright acquisition or tender offer. A company can buy all the shares of a company as an outright acquisition. The company being targeted is not notified by its board of directors and management. It is usually done for a premium over what the shares were worth prior to their acquisition.

A tender offer permits companies that are publicly traded to reach out to shareholders of a privately held company and offer to buy their shares at a cost that is agreed on by both parties. This is a form of a hostile takeover and requires the approval by the shareholders of the company being targeted before it is able to be finalized.

One of the main reasons for a company to seek M&A is the possibility to gain revenue and cost synergies through the combination of the two companies. For example, if a car company buys a company that manufactures seat belts it can achieve economies of scale and lower the cost per unit as production grows. Companies also use M&A to gain access to technologies that would be expensive or time consuming to develop internally.

About the Author // Vlad Strajnic

Graduated from the Academy of Arts in Novi Sad, Serbia. Acquired master degree in visual design from SPD, Milan, Italy. Worked as an art director in NY and Milan. Currently, creative director of Crafty Labs.

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