Have you wondered what it’s like to be at the center of a pending corporate takeover? Picture the most rigorous process and factor in all business-related terminologies. That’s it, right? Not exactly! Mergers and Acquisitions (M&A) is not for the faint-hearted, but those who dare to engage in it can learn a great deal of knowledge, about the inner parts of a corporate empire.
But, what can entrepreneurs learn from the latest corporate acquisitions? Let’s explore!
Why do top executives and business owners decide to do a merger?
What would drive a business owner to choose to surrender control over the business to another business? Why do I say this? Because, many companies tend to have stayed under the control of a family for generations, or the business founder spent a lot of valuable time building the business only, to let it go. Astonishing isn’t it? But, there’s a clear and logical justification for such actions.
Acquisitions provide businesses with an opportunity to take over the operations of another existing, established business. Hence, there are many reasons, which, when considered, lead top corporate executives and business owners to take over another company. For instance, some mergers are the means of killing the competition. Let me let you in on a secret. Remember when Facebook bought Instagram, which was a rival company, this was a way for the social media behemoth to kill the competition, and maintain control over their particular markets.
What’s more? Mergers can also allow big firms to gain new customers, boosting their productivity, and penetrate new businesses. Consider this: when Amazon purchased Daipers.com, this was a way for the e-commerce giant to penetrate the baby diaper market. In turn, the purchase helped boost Amazon’s productivity and eliminated a rival company.
But wait, there’s more to mergers and acquisitions than the hostility of eliminating other businesses. After all, the acquisition of Time Warner by AT& T, which was an effort to increase the latter’s foothold on the media industry, and lead to the mutual benefit of both firms. Besides, AT& T had previously acquired DirecTV, a direct broadcast satellite service provider.
Business models that can benefit from acquisitions
Most importantly, the entire Merger and Acquisition process is built upon strategy. Think about it this way, M&A experts have to look at everything with regards to all the parties of arrangement.
Business executives wouldn’t want to commit to a company that isn’t culture fit for them. Beyond that, there’s also the question of the geographic location of the target company. To sum things up, there’s no point in acquiring a company that resides in an area or a product in which the company has an 80% share of the market. In a nutshell, it all comes down to checking the compatibility of business perspectives between both parties, before making deliberate plans to make things happen.
Do you believe that acquisition entrepreneurship can work in your industry?
If yes, no, or maybe, check this out; consider these four business models. First off, make the product, resell the product, provide a service, and run a business online.
So, how can all these business models benefit from acquisition entrepreneurship? Let me tell you another secret: most corporate empires were built on the slogan of “buy than build.”
The point here is to use acquisition entrepreneurship to benefit from the established, mature business, regardless of the industry. Let’s walk through the entire process. Let’s suppose that you have a business that grew ten-fold during the pre-internet era. Moving forward, the success of your business will depend on how you adapt to how consumers are making their purchases today. Thus, every business will, at one point feel the pressure of changing their business practices, to employ innovative ideas and technologies. Then again, this change will have to be built alongside already existing, profitable business setups.
Now hang on! Acquisition entrepreneurship doesn’t mean that you buy just about any small business you can find. But first, look for a business with an existing customer base, which generates revenue, and holds a solid reputation. Here’s the thing: The Walt Disney Company acquired 21st Century Fox, a firm with a loyal consumer base, steady revenue stream, and long-lasting reputation. But that’s the key: to provide a solid ground under the parent company, to dive into growth.
How to assess the opportunity for a merger and acquisition?
Here are things you should consider when you are about to execute an M&A.
- Thoroughly evaluate the liquidity and financial capability of your business. Remember the last recession! If there are, anything companies learned from the entire ordeal is the importance of liquidity over profits. Always keep a close eye on your capital structure.
- Have a clear path to growth. How will your business change to serve a new customer base of a million people?
- Match your skills and put together the perfect team. Get the right team to capitalize on emerging market trends. In addition to that, you may find the need to employ external expertise depending on your skills.
- Assess the opportunity and educate yourself on the business. The success of your new venture hinges on your ability to recognize and capitalize on opportunities. Above all, ensure you maintain a healthy balance between risk and reward.
- Establish a measure for success. What is the objective of your company’s acquisition? Are you bringing in a new product to the market? Are you trying to break into a new and contagious market? What does success mean for your business?
In today’s world, corporate acquisitions have redefined how companies get into and out of a particular market. Entrepreneurs can learn from the latest corporate acquisitions that most company will grow by combining other companies through mergers and acquisitions. To make this process even easier, there is deal management software which helps you with insightful data and features.