Topic 3
Why M&A?
Topic 3 summarizes the rationale for undertaking M&A. Acquirers should have specific reasons that target their M&A effort to fill a strategic void (see Topic 1). M&A is not without risk. Having operational overlaps with potential targets is a reasoned way to mitigate potential risk impacts. Additionally, acquisition risk is mitigated by building your M&A capabilities with smaller, digestible deals before taking on a large one.
DEFINE THE ROLE AND GOAL FOR M&A
- Based on your strategic planning process, know the role you want an acquisition to play (see Topics 1 and 2).
- What do you want out of M&A? Consider these choices:
- Improve market or channel access position
- Improve product line or served market extension
- Fill a technology or other operational capability gap
- Achieve a targeted competitive advantage
- Promote growth or geographic expansion
- Eliminate redundant costs (plants and overhead consolidation)
- Consolidate or exploit excess capacity
- Improve long-term return on investment (ROI)
- Do a roll-up or consolidation leading to an initial public offering (IPO) or strategic sale
- Achieve incremental size and volume
- Do it just for the adventure (not a good idea)
- Deals are not about taking risk; they are about taking on and managing risk to achieve a desired end.
- The closer the capabilities and activities of the target company are to what the buyer knows and does well, the better the buyer can manage the risk of what can (and generally does) go wrong. (See Topics 26 ...
