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Defining Mergers and AcquisitionsTo elucidate, Mergers and Acquisitions, or M&As, in short, involve linking companies or assets through different types of financial transactions. The purpose or aim of M&As is to attain synergy, whereas this newly created entity is much more efficient than the two formerly separate entities that were on their own.
Types of Mergers and Acquisitions (M&As)Here are the two primary transactions that fall under the M&A umbrella: 1) Mergers Take place when two definite organisations join forces. Such undertakings usually occur between companies of the same size and acknowledge the benefits the other presents in maximising capabilities, efficiencies, and sales. The merger terms are often reasonably friendly and agreed to, and the two companies become equal partners in the new endeavour. There are several various ways Mergers are structured, which include:
- Vertical Merger
- Horizontal Merger
- Production Extention Merger
- Market Extention Merger
- Congeneric Mergers
How are acquisitions financed or supported?A company can purchase another with stock, assumption of debt, or a mix of some or all of the above. In smaller deals, it is also typical for one company to obtain all of the assets of another company. Hence, there’s another acquisition deal known as a reverse merger which occurs when a private company with solid prospects and is determined to obtain financing purchases a publicly listed shell company with limited assets and no certain business operations. Thus, the private company will merge with the public company relatively quickly, and together they become an exclusive new public corporation with tradable shares. Other types of M&As:
- Tender Offers
- Management Acquisitions
- Acquisitions of Assets
Stages of Mergers and Acquisitions (M&As)The following are the three stages M&As go through:
1) FoundationThis first stage is the intrinsic part of the acquisition wherein organisations establish the narrative for the company they are trying to obtain and develop acquisition strategies to clarify the objectives.
2) RelationshipOnce you make the acquisition strategy, the next stage is determining companies to acquire and urging the owners to sell. This phase includes establishing an intercompany relationship with an owner, which is a continual process beginning from an initial call, to a first meeting, and so on, and then finally to a term sheet which is a short but to-the-point document presented by the acquirer to the aimed company highlighting the price and terms of its acquisition offer.
3) DealRefers to the final stage, where companies administer a last-minute business appraisal and inspection after receiving the signed term sheet. This is a must to ensure that it suits the company financially and in long-term growth.
Benefits of Mergers and Acquisitions (M&As)In a nutshell, here are the upsides of Mergers and Acquisitions:
- Boost economies of scale
- Scaled manufacturing
- Minimise labour costs
- Streamlined products and services by bringing together existing offerings and developing new ones
- Larger market share
- A more excellent market position
- More profound expertise and combined customer insights for better strategic decision-making that will result in a better client experience
- Level-up distribution capabilities: By expanding geographically, companies can gain access to the new distribution network and grow their geographic markets
- Enhanced labour talent: greater ability to attract top talent
- Greater purchasing power
- Faster progress and launch of new technologies
- Amplified financial resources: The financial wherewithal of two companies is vastly greater than one alone, making new investments feasible.
Accurate Forecasting and Maintaining Your Cash Flow Positive with the Moolahmore App: Key To A Successful M&AsA fast and modern cash flow tool Moolahmore jam-packed with powerful features such as a user-friendly interface, automation process, scenario forecasting, comprehensive analysis, seamless integration, quick report generation, and security mobile-enabled will help business owners and decision-makers like you gain valuable insights into a company’s cash visibility, liquidity management, and risk management. In addition, it will also guide you through more informed M&A decisions in the following ways:
- Stay economically secure and increase profitability: By planning capital expenditure project outlays in advance and taking action toward M&A goals.
- Achieve excellent asset management: Easily examine assets’ quality and update or change dates to save for new acquisitions and find buyers for depreciating assets.
- High gross savings equals low payback time: With an automated tool like Moolahmore, rather than data gathering and model construction, you’ll be able to concentrate on acquisition planning. It helps you save effort and cost in performing the same or similar process resulting in high gross savings. Hence, you can invest that saved amount in mergers and acquisitions for faster ROI.
- Obtain granular cash flow visibility: Have a more accurate forecast of A/R and A/P since the Moolahmore app incorporates external factors such as seasonal trends, business cycles, discounts/rebates and different payment terms.
- Costs Involved: Remember that mergers and acquisitions come with significant costs (e.g. advisers/accountants fees, legal fees, taxes and debt/equity). That said, before committing to M&A, it’s a must to consider these costs to prevent any shocking surprises.
- Logical or wise scenario planning: Molahmore allows you to monitor current and potential cash flows. It also assists you in assessing the rewards, risks, and cash flow implications of any mergers or acquisitions, so you’ll be ready for any financial slumps resulting from such a transaction, and then you can take necessary actions.
- Ensure you have sufficient resources: Through Moolahmore, you will know if you have adequate resources to guarantee the successful integration of the two entities.