The ABC of M&As

M&A的圖片搜尋結果2015 has been a promising year for M&A ventures, most being led by tech companies.  Given the positive stance of M&A trends this year, the impression is that merging companies are a sure route to increased growth in corporate finance and maximized revenue for companies in today’s stabilizing economy.

It is easy to see from the initial public offering trends and equity capital market deals that big companies such as Yahoo, Google and even the second largest IPO to be launched, Facebook in 2012, have successfully mastered their businesses and grown to be giants by acquiring external companies that could have later on become competitors.

Before you dive your company into the M&A trends, you may want to make sure you have exhausted all internal alternatives for growth before taking the big cake.

 

IT IS A RELATIONSHIP

IPO trends glamorize the process. When one company acquires another, one of two things is likely to happen. First, the relationship will be mutual and both companies will grow as one. Second prospect and actually the most common one is that the company being bought out will cease to exist and its employees, CEO and staff, most likely replaced.

Just like a relationship, it does not end once the deals are made and the joints are signed. If the idea of managing your one company overwhelms you, try two or three. Yes, that’s M&A.

 

IT IS COSTLY PROCEDURE

Your company may have the money to go through a deal, but remember that it is more than finances at stake here. The brand of your company is also hanging in the balance if your company is being acquired. If you are the acquiring, it means bigger responsibility and working or replacing new staff, and managing them to maintain your brand.

Furthermore, before launching into an M&A, your pre IPO consensus will be scrutinized, any debts you have will surface and the nature of your business will be exposed. This means a risk of losing your trade secrets and being kicked out by your merging company – ouch.

To avoid losing out during the process, you may want to hire lawyers, accountants and also your own investigative team. It is a big deal, so never go in blind, but it will cost you.

 

IT IS NOT ALWAYS A WIN – WIN SITUATION

In an M&A venture, it is plausible for one company to become overtly-dependent on the other, which means it is no longer able to function well on its own and turn out to be a drag.

In other cases, as mentioned earlier, one company will realize that they don’t have much need for the other and break up. Like the time when Apple stopped using Google Maps in its applications and launched its own.

Your company is indispensible as long as you keep its trade secrets. Nonetheless, it is important for you to have a plan B in case things do not go as planned.

It is a business so you cannot depend on emotion.