What role does an M&A advisory firm play? How critical a part is played by Merger and Acquisition strategies towards the growth of an organization? Let us find out what these strategies do and you will get answers to both the above questions.
An enterprise has many ways to grow. However, the most common classification is twofold:
1. ORGANIC GROWTH:
: Take in more people, expand geographies, increase the product line, improve productivity and in short, slow & steady wins the race.
2. INORGANIC GROWTH:
: Look outside, think out of the box, create new ideas, increase valuation, look for synergies and take the fast lane to success.
There are many strategies when it comes to inorganic growth. One such strategy is called merger and other one is called acquisition.
A merger has more to do with marriage of equals. Take an example of world’s largest & a successful merger, Exxon & Mobil. These two oil giants came together to explore synergies and created much more value for the stakeholders. One can say, in their case, it was two plus two equals to much more than four.
Mergers are also like modern day marriages. Sometimes they work, sometimes they don’t. Take an example of two auto giants. Daimler Benz and Chrysler Corp. At the outside, they seem to be made for each other. Just like a perfect couple. One is into high end class of Germany, and other, into hearts of masses in USA. However, due to culture and many other differences they had a very bitter fallout.
In this case, the big fish, usually ends up eating a small fish. Acquisition is done when a big company wants to grow even bigger, have more market share, eliminate competition, enter new market with established brand name and so on.
Acquisitions could be mutual, negotiated, or forceful. Take the example of Captain Cook acquired by Hindustan Unilever. The parent company DCW, a family run business, willingly sold the brand captain cook to FMCG giant at an agreed price. Later, Unilever did not feel the need to continue the brand and it was killed.
Recent forceful acquisitions that made headlines included Laxmi Mittal acquiring Arcelor Steel and Tata Steel acquiring Chorus. Time will tell what happens to new bigger entity. Another takeover, a more negotiated one, done by Tata Motors to acquire Jaguar & Land Rover is turning out to be more fruitful.
Mergers & Acquisitions, to conclude, help the companies to grow faster, by crashing time or one can say, trading time with money.
At ProBizAdvisor.com, we are one of those private equity offering firms in Mumbai. Besides helping to raise funds for a variety of businesses and start-ups, we also provide outsourced CFO services, i.e., help in setting up business strategies, performance reviews, systems as well as risks assessment.