Companies of every size around the world place a high value on M&A to boost growth. However, there are many things that could potentially go wrong, which is why it’s so important for businesses to plan carefully before pursuing an acquisition deal.
The first step in executing an acquisition deal is conducting high-level evaluations of potential targets. Typically, this involves reviewing the market in which the company operates, their financial reports, and looking at how they could strategically fit into the buyer’s business.
One of the most common types of acquisition deals is a “conglomerate” purchase, where a business purchases an enterprise that functions outside of its industry. This can be a smart way to diversify holdings, profit from a new technology, enter a foreign market, or simply make an easy investment.
Another type of acquisition deal is where a company buys all of the assets of a target company. This is usually done to avoid taking on the company’s liabilities, which are typically unquantifiable and could include damage awards from lawsuits, environmental issues, and employee claims.
When considering an acquisition, it’s also important to take into account the cultural fit of the target firm. Some of the largest M&A transactions have failed because of culture clashes between the two firms. This is why it’s so important for buyers to conduct thorough due diligence before buying a business. This can help them to assess how well the company will fit into their existing structure, and ensure that the price they’re paying for the business reflects its intrinsic value.