Accounting Blog for Business
Posted by D&V Accounting Services
Sep 11, 2014 11:00:00 PM
According to the most recent studies from Thomson Reuters, there is a surge in the total value of assets for mergers and acquisitions (M&A) worldwide. In the first quarter of 2013 alone, the value of the total assets jumped by 10%.
Having asserted the fact that there is a lot of potential profit coming in from M&A might urge you to give this strategy a try. As a common option for companies that are targeting a different business strategy by merging with a different company and forming a new one (mergers), or acquiring a new enterprise (acquisitions),
Having asserted the fact that there is a lot of potential profit coming in from M&A might urge you to give this strategy a try. As a common option for companies that are targeting a different business strategy by merging with a different company and forming a new one (mergers), or acquiring a new enterprise (acquisitions), M&A piques the interest of a lot of American business owners. If you are one of them, you might as well take a look at what this strategic business move can do for you and your business.
When it comes to the most vital M&A concepts that can guide your business decisions, two of the most essential items that you need to have a tight grasp on are revenue synergies and shareholder value.
Revenue synergies are basically the increase in revenue which comes as the result of the M&A transaction. Since it asserts the value of the merged or acquired company, most entrepreneurs put a lot of effort into ensuring the high level of revenue synergies for the said transaction.
Another invaluable concept that you should take into consideration is the shareholder value – or simply the return on investment for the said transaction. This is important because it is directly linked with the profitability of your decision to give M&A a go.
Success in M&A
One of the major issues that business owners have over M&A is the guarantee of a good profit. Since M&A puts your business assets and overall cash flow at stake, it is necessary to ensure the highest possible ROI that it can yield. The question is, do M&A strategies offer guaranteed success?
The important thing to consider is that the success of mergers and acquisitions largely depend on a number of factors. Your perspective on success, the goals and objectives that your business have set, and the duration you are eyeing are just some of the things that come into play.
The M&A Setback
The red flag in M&A initiatives is the possibility of failing in your chosen consolidation strategy. In this case, poor valuation tops the list of the things you should be wary of. Poor negotiation skills and miscalculating the value of the company sets the stage for poor valuation. Equally important in negotiating for M&A is putting a strategic plan in place and retaining valuable resources such as innovations, skills, and a unique set of products and services.
Making the decision to go forward with M&A puts a lot at stake. For this reason, dipping a toe into this business strategy requires thorough planning and research. If you are seriously considering M&A as a business consolidation strategy, click here to get in touch with our advisers at D&V.