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Introducing mergers and acquisitions

By Beatrice Thomas

Flip open the business pages of your national newspaper and you’ll consistently find articles about mergers and acquisitions (M&As). That’s because in the business world, they’re a part of life.  

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There’s an old adage that says two heads are better than one and that’s pretty much what underpins mergers and acquisitions. 

Two companies may merge and become an entirely new company because both owners/CEOs agree that’s the best thing for the future of each enterprise. Alternatively, one company (called the target company) does not want to merge or be bought, so they are taken over – this is an acquisition.  

Businesses usually engage in mergers and acquisitions to grow into another market, or to grow larger. M&As can also create economy of scale because operational and administrative costs of the business decrease. Management can be streamlined while account departments and sales teams are restructured and reduced. Things like rent can be lessened when the two companies share a physical location such as an office or warehouse.  

Service based industries like accounting, IT and similar, feed off other industries and don’t produce their own product. Therefore, in a downturn, they try to increase their revenue base and reduce their costs often through mergers and acquisitions.  

Jamie Davison, co-founder of Carbon group and start up investor, says mergers and acquisitions happen more often in downturns because businesses want to rationalise.   

If you’re interested in looking at a merger or acquisition, a business broker can help. You can also let industry associations know you are looking to get out.  

Some things for you to mull over when considering a merger or acquisition:  

  • Plan: What do you want to achieve in this process? 
  • Discuss: Talk to your accountant, business coach or board of directors and compile some points about what you want to achieve for the business.  
  • Vision: Does the M&A align with your company mission and vision (re-visit this consistently through the process).  
  • Merger objectives: Make a clear list of your merger or acquisition objectives and memorise it as much as you can.  
  • Clarity: Be really clear about what you want out of the meeting with the person helping you with the merger and acquisition, whether it be a facilitator, broker, accountant or agent.  
Flip open the business pages of your national newspaper and you’ll consistently find articles about mergers and acquisitions (M&As). That’s because in the business world, they’re a part of life.  

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