An acquisition deal is the act of one company purchasing another business to gain its assets and market share. The purchase involves a series of steps, including due diligence, valuation and negotiation. The process often involves reviewing documents and financial statements, contracts, intellectual property, employee agreements, and more to determine the value of the target company. In addition, it is common for the acquiring company to negotiate a price and payment structure.
The main benefit of M&A is to diversify a firm’s product portfolio, giving it access to new market segments without having to spend money building manufacturing infrastructure in those regions. This is known as the “parenting advantage” concept and it can boost a firm’s competitiveness. For example, Volkswagen has acquired several car manufacturers to increase its range of vehicles and gain access to their customers and supply chains.
For the acquirer, a successful acquisition can significantly reduce operating costs by allowing it to consolidate labor, supplies and equipment. It can also speed up growth by gaining access to new products, markets and customer groups. However, M&A can be risky. The acquiring company must conduct thorough due diligence to avoid purchasing a target that cannot provide the expected return on investment, or may hurt its brand image.
The acquisition process can be especially complicated when the companies involved have different cultures and business practices. M&A consultants can help to manage the integration process and ensure that both parties’ goals are met. For example, the acquiring company must decide how to reward employees to encourage buy-in during the transition period. It must also establish milestones to guide the process and ease employees’ concerns. Moreover, it must review any environmental issues that might affect the property’s development potential. For example, a property may have an easement for neighbors to use the road through it or an endangered species preserve that requires it to obtain permits.