Top managers and consultants are cautious about calling acquisitions “post-merger integration.” But they turn into tension, uncertainty, and even chaos. So, this article will consider the important points to pay attention to when organizing an acquisition.
Company acquisition: important things
Mergers and acquisitions (M&A) of companies are recognized worldwide as one of the most effective ways to find the necessary resources to expand their activities in increasingly global competition and changing market conditions. However, with every second M&A deal, the management of the acquiring company makes certain critical mistakes in the valuation of the acquired company, in the bidding for its shares, or in the process of integrating companies after the acquisition.
According to Deloitte, technology acquisition is the main driver of new company acquisitions. Other M&A goals include: entering new markets, developing new products and solutions, pooling talent, and increasing innovation or brand value. But still, the main goals of M&A are the expectation of profit growth and the potential for business synergy in creating new value in the market.
Investors usually describe such transactions in different ways. For example, if the board of directors of the target company approves of the takeover attempt and is willing to cooperate, then such a transaction is called a “takeover.” On the other hand, acquisition occurs when the target company opposes the deal and leaves the larger firm no choice but to buy more and more shares until it gains control of the enterprise.
The effectiveness of the merger or acquisition depends on many factors that must be considered and controlled during the integration procedure. The work to achieve the economic benefits that the company will receive after the merger/acquisition is characterized by a high intensity of the integration team. It requires a great return from managers and top managers at all stages of its implementation.
Strategic approach for successful acquisition
Before making acquisition decisions, the goals and understanding of what the asset will cover function of the expertise should be clearly defined, whether the transaction will increase growth and supply for the market:
- identify one key business need for acquiring a new company – investment in future technologies, market scaling, process optimization;
- pay attention to market trends, studying the needs and requests of customers;
- look for businesses where you know the technology, product, or players;
- keep successful businesses, startups, and even teams in your field of vision.
The absorption of a new asset is a rather lengthy process, broken down into several stages:
- Opportunity Evaluation – allows you to determine the value of the acquisition object. In our case, the purchase of companies is due to the possibility of future growth due to new expertise.
- Signing Pre-agreement and Due Diligence – “paper” work – is the main focus at this stage. The main terms of the forthcoming transaction are determined, and the initial agreement is signed with detailed information on the legal and financial aspects of the agreement.
- Deal structuring – detail the deal in formal documents. At the same time, special guarantees can be specified to protect against specific identified risks.
- Closing Deal – after reaching an agreement on all issues and aspects, the process of finalizing the agreement begins.
The Integration Process is an important stage that determines how your “ship will sail”: whether you will achieve the goals outlined at the stage of transaction evaluation and how the business will develop further. Currently, we are actively going through the integration process with the last acquired asset.