As
a business owner, one is however are always in search of how one can grow the
business. One however wants to make more money and also in order to serve
a larger customer base. The problem is thus
identifying the best way in order
to grow the business, and thus also doing so at a rapid pace.
Mergers
and Acquisitions (M&A) are
considered as a great way in order to
grow business without however having to
wait years for the marketing and also sales strategy in order to pay off. When
one however needs immediate growth for the business, this can
thus be the best option for one that
thus provides the instant result. The primary goal of a company which is
interested in a merger or acquisition is thus to secure an opportunity that
will thus either achieve the objective
of growth or to provide an area of expansion that will thus add to the
product/service line in a market that is thus currently not served by the
company. The motivation behind this pursuit is thus that the resulting combination of the products,
key people, and the existing pipeline will however allow the business in order to operate in the new markets and also offer new options to
their existing market.
Over
time, merger or acquisition opportunities may however present themselves as a growth opportunity
for the business. M&A can thus be very distracting to an early-stage
business thus still trying in order to optimize their stand-alone business. Especially when things can however often go awry in the merging businesses, management teams and also
employee cultures. But, assuming if one
has done his homework on those fronts,
and one is also comfortable in thus taking the leap into world of M&A, here
are however five considerations when setting one is M&A goals for business.
1. What Does the M&A Target Bring You?
There
are however many things which an M&A
transaction can thus bring one : the
customers, market segments, operating scale, revenues, cost savings, human
talent, new products, capital, patents, and everything which one would name
it. The key however is thus prioritizing
as to what is the most important thing
which one’s business needs in order to succeed, preferably something
which one however cannot easily build on his
own. If one however has the best
product in the market, one would thus tend in order to stay away from the targets that thus only brings the customers
or an additional market share, as thus those relationships can thus be secured
through the strong sales and also the
marketing efforts without having to dilute the equity owners. So, one must also focus on the transactions that will thus materially move one’s business to new heights, for the reasons
beyond simply an additional market share.
2. Is the Transaction Accretive to Your Shareholders?
Also,
one might thus either going to pay for the M&A transaction with cash (which
may thus require raising the capital) or
either with equity (issuing the
additional shares in the company). In
the either scenario, it is thus
also most likely going to dilute the
ownership of the current investors. One
might just also want to make sure that the resulting
business is thus going to be worth
materially more together, than they however
are apart, so that the current investors will thus actually have a
higher a economic dollar value of stock, even if thus their stock ownership
percentage is thus less.
3. Does 1 + 1 = 4?
In
one scenario, where one thus merges two similar companies thus both selling
into the same customers, one’s combined revenues will thus never be worth more than 1 + 1 = 2.
4. Does the Transaction Improve Your Competitive
Position?
Maybe
the two competitors are thus in an aggressive pricing battle, lowering their
margins farther than they however need
to. By however combining, they may thus be able to raise their prices and also
the margins however as one company. Or, maybe a #2 and #3 player thus in the market
thus combine, in order to create the new #1 player in the
market. Or, thus as another example,
maybe alone which one however has 50%
dependence on one customer or an
industry, and also thus combined with however another company one can thus also lower that dependence to 25%, making the
business however perceived thus as
less risky to the investors. One must thus also think through these
advantages when one is however picking optimal transactions.
5. Are the Two Businesses Compatible With Each
Other?
Mergers
in the business are however very much
like the marriages between two individuals.
One thus also make sure that one
dates a while, before one
however combine forces. Also, one must also make sure the two businesses share one
combined vision thus for their
future. Also, one must make sure that
the management teams thus gets along, personality fit wise. One is thus also supposed to make sure the
two employee cultures will thus mesh well with each other. One must thus also
do everything which one can however do
in order to reduce the unwanted employee
turnover in the wake of the transaction.
If the businesses are thus however
not compatible, move on.
Assuming
that one however have good answers to the above questions, one is thus probably
in a good position in order to proceed with the transaction. But if one however can't craft the right logic,
or thus however any warning bells are thus also going off in the mind, it is thus the best in order to walk away. Too many things are thus also naturally going
in order to go wrong post an M&A transaction. One also does not want to go into it with the known hurdles out of the gate, as it will thus most likely result in a big
distraction and also disappointment for one
and also for the
shareholders. Before one
gets started, one must be sure in
order to read this post on thus the other potential M&A pitfalls to avoid.
This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST Software, GST Return Filing, GST Registration, Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online.
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