Main Area

5 Actions to Enhance Shareholder Value in M&A Deals SPONSOR CONTENT FROM EY

Posted on June 8th, 2021

However, it is important to note that the realization of these benefits depends on effective post-merger integration, sound strategic planning, and the alignment of the companies’ objectives with shareholder interests. Discover how mergers and acquisitions in the finance industry benefit businesses, investors, and the economy. Organic growth (aka Growing value internally rather than via strategic acquisitions, which is called inorganic growth) cannot always attain economies of scope. For example, Facebook tapped into the demand of a much larger client base and benefited from economies of scope by acquiring WhatsApp and Instagram.

A deal sourcing platform, such as Sourcescrub, can help fuel M&A data and analytics, streamline dealmakers’ efforts, and enable them to find opportunities before anyone else. By carefully selecting acquisition targets that complement their existing operations and strategic goals, companies can achieve significant growth and strengthen their position in the market. The acquisition provided Walmart with access to Flipkart’s extensive customer base, technology, and supply chain infrastructure in India, significantly accelerating its market expansion efforts.

This means that if one area is adversely affected, other segments can support the company’s overall financial health. In a nutshell, mergers and acquisitions offer big advantages like boosting market share and tapping into new markets and talent. These strategic moves can help companies grow, increase profits, and stay ahead of the competition.

The integrated company might increase its price if the acquired company was a competitor. At the same time, there might be opportunities to offer better pricing to the customers if the new, benefits of mergers and acquisitions increased scale allows it. As a result, the integrated company can capture a more significant market share. A business merger or acquisition presents an effective strategy for company expansion and new revenue streams that can improve bottom-line profitability.

• Business is inherently risky, so many organizations involved with M&A wisely follow the old adage of “Don’t put all your eggs into one basket.”
• Here are 17 benefits we have seen across industries during our decades of work supporting mergers and acquisitions.
• Often these companies will be in some financial distress, but a deal can be made to keep the company afloat while the buyer benefits from adding immediate value as a direct consequence of the transaction.

Advantages of Mergers and Acquisitions

The companies that wait on these areas risk missing out on valuable time to quickly realize value and eroding the deal value post-close. Yes, it helps to have strong relationships with investment banks who know your sector and know which assets are on the market. The business unit presidents of effective serial acquirers identify early potential targets and use their relationships to bring the opportunities to corporate development. Many companies are capable of developing their strategy, and numerous business units are competent at creating investment cases for their programs and initiatives. However, these companies may still experience challenges when linking strategies and opportunities together. An effective capital allocation strategy incorporates the enterprise strategy and helps decision-makers plan, select, manage, and evaluate investment opportunities.

Synergies

By divesting non-core assets, companies can free up capital and resources to invest in areas with higher growth potential. A merger is an opportunity to choose standout talent from both companies and streamline the organizational structure. The integrated company doesn’t need to retain the entire staff from the acquired and acquiring companies.

New product or service opportunities

For example, a cannabis company focused on researching, cultivating and processing a product might decide to acquire a player with strong distribution capabilities to bring its product directly to the end customers. Access to knowledge and innovation is one of the most significant benefits of a merger or acquisition, especially in industries such as pharmaceuticals. It can come in many forms, such as product, process, manufacturing knowledge, or innovative supply-chain management.

Achieving Cost Efficiencies and Synergies

This can be achieved by eliminating a competitor, gaining proprietary technology, or consolidating market share. Mergers and acquisitions often result in synergies, where the combined entity’s value exceeds the sum of the separate companies. M&A synergies can arise from cost savings, increased revenue opportunities, or enhanced operational efficiencies. Let’s take a closer look at the several benefits mergers and acquisitions can bring. Companies that embed HR strategies early in the M&A process can reduce cultural resistance, retain key talent, and facilitate a structured, people-focused integration. By proactively managing workforce challenges, HR helps transform M&A from a transactional event into a well-executed transition that supports long-term growth and stability.

• With conditions so poor, many banks merged to protect themselves over the next few years.
• HR can help protect goodwill, stabilize the workforce, and ensure a smoother transition for employees.
• M&A success is not solely determined by financial projections and operational synergies, it also depends on how effectively organizations integrate and engage their workforce.
• Cox Communications is committed to creating meaningful moments of human connection through technology.
• Vertical mergers involve companies within the same supply chain, such as a manufacturer acquiring a supplier or distributor, streamlining the production process and enhancing efficiency.

Effective communication and collaboration tools can help manage operations across different time zones and locations. Mergers and acquisitions provide a direct avenue to access a skilled workforce and specialized knowledge. This strategic move diversified Disney’s content and expanded its reach in the superhero genre. In the ever-evolving business landscape, putting all your eggs in one basket can be a risky move. You can learn more in our guide to the differences between mergers and takeovers. Download now for a deep dive into insights shaping the business and technology landscape.

Business Acquisition to Gain Talent

In this article, we’ll discover ten possible reasons that drive companies to opt for M&A. Additionally, we’ll explore the six types of mergers and acquisitions and provide real-world examples of highly successful M&A deals. M&A facilitates internal and external growth, offering diversification, expanded distribution capacities, greater brand recognition, and potential tax benefits in new markets.

In 2016, Microsoft acquired LinkedIn for $26.2 billion, combining the technology giant’s productivity software and cloud services with LinkedIn’s professional networking platform. With access to LinkedIn’s vast user base, Microsoft aimed to integrate professional data and insights into its product suite, including Microsoft Office and Dynamics 365. A financially robust and larger business is often perceived as offering greater stability and growth potential, making it an attractive employer for skilled professionals. Sell-side M&A should proactively approach the deal, clearly communicating its unique value proposition to potential acquirers and ensuring them that together, they can achieve a competitive edge. Cross-border acquisition benefits are especially evident as going into foreign markets can be challenging because of unfamiliar regulatory frameworks, cultural differences, and language barriers. In addition to revenue, both sides of the transaction offer many other benefits to each other.

Within a year after the closing, the combined company will change its name to Cox Communications. Spectrum will become the consumer-facing brand within the communities Cox serves. The combined company will remain headquartered in Stamford, CT, and will maintain a significant presence on Cox’s Atlanta, GA campus following the closing. Beyond retention, HR’s role extends to managing compensation structures, ensuring compliance with employment regulations, and fostering a culture of transparency.

Long term, this can be used to fund innovation, expand operations or even explore new ventures. Allegrow is an M&A Communications Firm focused on driving growth for middle-market organizations expanding through mergers and acquisitions. In this blog, we’ll explore how M&As offer strategic, financial, and competitive advantages, and dive into the key benefits that make them so attractive.

Acquisitions, on the other hand, involve one company taking over another, either wholly or in part, to consolidate its position in the industry or to acquire specific assets or capabilities. Whether you’re a seasoned entrepreneur or a budding business owner, understanding the nuances of M&A can be a game-changer for your company’s growth and success. Yes, you typically need a solicitor for a merger to ensure that all legal, financial and regulatory aspects are properly addressed. Buy a business solicitors can draft and review essential documents, perform due diligence, and help negotiate terms to protect your interests. In some cases, acquiring smaller high-potential companies helps secure future value as they expand and contribute to the overall market capitalisation. A notable example is PepsiCo’s acquisition of Frito-Lay, where PepsiCo integrated Frito-Lay’s snacks into its existing distribution network, lowering logistics and transportation costs for both product lines.

Mergers and acquisitions can be categorized into several types based on the nature of the transaction and the strategic objectives they aim to achieve. Mergers and acquisitions (M&A) are corporate strategies involving the consolidation of two or more companies to achieve business objectives. To ensure the full realization of your powers combined, companies should conduct thorough due diligence, validate assumptions, and develop a comprehensive integration plan. Establishing a dedicated integration team, setting realistic targets, and monitoring progress can help identify and address issues early on, improving the chances of achieving synergistic benefits.

DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. The social journey of employees during an M&A can be transformative yet fraught with uncertainty. For many employees, M&A leads to a shift in work culture, new roles, and often, concerns about job security and benefits. According to Deloitte’s Global Human Capital Trends Report 2024, 86% of workers and 74% of leaders consider trust and transparency between employees and their organization to be very or critically important.