The merger and acquisitions market is among corporate finance’s most exciting and lucrative markets. Although it’s not a method that every company can explore, for those that can make it work, M&A can create tremendous growth potential. M&A transactions are generally complex and require careful planning and execution in order to be successful. The M&A begins with a thorough assessment of the business. It could involve high-level discussions between vendors and buyers to see how the two companies strategically integrate.
Once the initial review is completed, the acquiring company could make a preliminary offer to the firm it is targeting. Depending on the situation, this can be done either through an outright acquisition or tender offer. A company can acquire all the shares of a company in an outright acquisition. This is done without the board of directors or the management of the company being targeted.
A tender offer permits an publicly traded company to contact the shareholders of a find more publicly owned company and offer to buy their shares at a cost that is agreed by both parties. This is a form of a hostile takeover and requires the approval of the targeted company’s shareholders before it can be finalized.
The main reason for a company’s pursuit of M&A is the opportunity to reap revenue and cost synergies by combining the two companies. For example If a car maker acquires a manufacturer of seat belts, they can realize economies of scale and reduce the cost per unit as production increases. M&A is also utilized by companies to gain access to technologies that would be costly or time-consuming to develop in-house.