Mergers and Acquisitions from a Wealth Management Perspective

With the number of mergers and acquisitions (M&A) expected to rise by the end of 2024, more and more companies are looking into the growth and potential that comes with M&A.  

 
As a wealth management firm, it has become common to advise companies of the risks and benefits of merging with another entity 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 from M&A, companies looking to expand might want to investigate this strategy: targeting mergers and acquisitions.  

Read: 6 Steps to Find a Reliable Wealth Management Company  

Since the emergence of globalization, M&A has piqued the interest of a lot of American business owners – resulting to conglomerates being formed, international franchising and an overall global expansion. However, outside of the visible large-scale benefits of M&A, what do merging and/or acquiring as a business decision mean for your company?  

The Basics of Mergers and Acquisitions

When it comes to guiding your business decisions, two of the most vital M&A concepts 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 Mergers and Acquisitions 

One of the major issues that companies 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?  

A simple yes or no isn’t enough to answer this question given that the success of mergers and acquisitions largely depends on a number of factors. Your perspective on success, the goals and objectives that your business has 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. Looking at the potential benefits and risks involved, companies need to understand that they need to have a stable financial footing before deciding to proceed with an M&A.  

If you are considering moving forward, it would be best to get professional financial managements services to help you create a realistic M&A strategy that aligns with your company’s operations.  

Read Next: Wealth Management and Financial Planning: Understanding The Difference   

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This post was first published on 11 September 2014 and edited 13 December 2024. Edited by: Aly Tagamolila