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M&A: what is it?\n<\/strong><\/h2>\n
The concept of M&A<\/strong> is certainly one of the best known in the business world.<\/p>\n The acronym stands for Mergers<\/strong> & Acquisitions<\/strong> and indicates strategic activities that may involve two or more organizations.<\/p>\n The outcome of these processes is a change in the structure of the companies involved<\/strong>, which can be either private or public.<\/p>\n Although the terms are often used interchangeably, there are important differences<\/strong> between acquisition and merger activities.<\/p>\n Acquisition<\/strong> involves the transfer of ownership<\/strong> of one company to another, through the purchase of a majority stake in the capital of the acquired entity.<\/p>\n The acquirer may sometimes retain the right to use the previous brand,<\/strong> without therefore replacing it with its own brand.<\/p>\n An example is the acquisition of Instagram by Mark Zuckerberg’s Facebook<\/a> in April 2012.<\/p>\n In contrast, a merger<\/strong> between two or more entities results in the creation of a new corporate entity<\/strong>. In this case, the parties involved combine their assets to pursue common goals<\/strong>, strengthening their position in the market.<\/p>\n More precisely, the merger may give rise to a new entity – the so-called newco<\/strong> – with the disappearance of the pre-existing entities, or it may result in the absorption of one company into another, in which case the merged company loses its legal identity.<\/p>\n An example of a newco is the merger between the PSA and Fiat Chrysler Automobiles groups<\/strong> with the birth of Stellantis<\/strong> <\/a>at the beginning of 2021, a record year for M&A transactions worth $5.9 trillion globally<\/strong><\/a>.<\/p>\n But what are the main types of M&A<\/strong>? Let’s look at them with some examples.<\/p>\n <\/p>\n Conventionally, a distinction is made between four types of M&A transactions<\/strong>.<\/p>\n Let us understand their features, using examples from the B2B world<\/strong>.<\/p>\n In a horizontal M&A<\/strong>, the companies involved operate in the same sector<\/strong>, developing similar products or services.<\/p>\n A case in point is that of a company specialising in pneumatic components for the automotive industry that decides to acquire a competitor abroad<\/strong>, to strengthen its production structure and preside over a new market<\/strong>.<\/p>\n In a vertical merger or acquisition<\/strong>, companies operate within the same supply chain<\/strong>, but with different roles<\/strong>. The same company as in the previous example could acquire a wholesaler of car components<\/strong>, to integrate a distribution channel<\/a> into its structure.<\/p>\n It occurs when the companies involved develop and market different products or services<\/strong>, but target the same customer segments<\/strong>.<\/a><\/p>\n An example is when a company specialising in machinery production decides to merge with a company operating in the field of surface treatments for metals, developing a complete range of services for the metalworking world.<\/p>\n So-called conglomerate M&A<\/strong> take place between organizations from different sectors<\/strong>. The aim is often to expand in order to reduce risks<\/strong>, increase profitability<\/strong>, review their cost structure<\/strong> and integrate new competencies<\/strong>.<\/p>\n A case of conglomerate M&A is when a company specializing in industrial machinery<\/strong> decides to acquire a majority stake in a corporation producing electronic systems<\/strong>.<\/p>\n <\/p>\n Find now new clients, distributors and suppliers in 196 countries.<\/p>\n Request your free analysis<\/a><\/p>\n Regardless of the type, every M&A transaction has fundamental steps<\/strong>.<\/p>\n The first one is the strategic evaluation<\/strong> of the project.<\/p>\n For example, an acquisition may be dictated by the will to grow in a high-potential market<\/strong> without setting up a foreign subsidiary.<\/strong> This makes it possible to take advantage of already existing production, distribution and financial structures without incurring the costs to develop them.<\/p>\n For a company aiming to penetrate new foreign markets<\/strong>, the purchase of an already established competitor<\/strong> can therefore be an effective choice.<\/p>\n This phase is followed by the analysis and selection of companies in line with the strategy.<\/p>\n The screening of potential candidates<\/strong> is a crucial but complex operation: companies reflecting specific criteria, defined a priori, must be identified.<\/p>\n These criteria can be both qualitative<\/strong> and quantitative<\/strong>.<\/p>\n Returning to the example of the car parts manufacturer, factors to be taken into account could be the EBITDA of the competitor to be acquired<\/strong> (quantitative criteria<\/strong>) and the type of products offered<\/strong> along with the certifications possessed<\/strong> (qualitative criteria<\/strong>).<\/p>\nTypes and examples of M&A in the B2B world<\/strong><\/h2>\n
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Horizontal M&A<\/h3>\n
Vertical M&A<\/h3>\n
Concentric M&A<\/h3>\n
Conglomerate M&A<\/h3>\n
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The phases of an M&A strategy<\/strong><\/h2>\n
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Conclusions<\/strong><\/h2>\n