Merger and Acquisition: A Detailed Look into the Types, Benefits and Stages

India’s total merger and acquisition operation in 2020 reached a valuation of 36.9 billion USD, which was a 33% YOY increase from 2019. Such impressive data certainly proves the impeccable growth that the country is achieving in terms of foreign investments. Therefore, it is also establishing itself as one of the lucrative hot spots for foreign business investors.

However, complicated financial and legal frameworks, intricate business structure and potential market uncertainties often prove difficult for foreign investors to formulate adequate M&A plans without professional assistance. Most organizations, therefore, are actively collaborating with top mergers and acquisitions firms in India to secure fair deals and reduce investment risks.

What are Mergers and Acquisitions?

Merger and Acquisition

Merger and acquisition (M&A) is one of the most crucial steps towards growing business activities and securing better profit margins. M&A is largely defined as the consolidation of companies or assets with a strategic business or financial transaction. This act of corporate restructuring plays a significant role in the corporate finance space.

Now, though the terms merger and acquisition are often used interchangeably, they are widely different in concept and outcomes. “Merger” refers to the act when two companies join their forces together and come to exist as a completely new business entity. On the contrary, “Acquisition” refers to a financial transaction in which a company takes over another completely or majorly, such that it begins to execute absolute control over it.

Types of Merger and Acquisition

Merger and acquisition are generally categorized into four types which are listed below.

  • Horizontal M&A
    When two companies that trade on similar services and have the same supply chain join forces, it is known as horizontal M&A. This helps to expand the range of the products and service and establish a dominant presence in the respective market.
  • Vertical M&A
    When two organizations that belong to the same industry but have a distinct range of products and services collaborate together with a financial transaction, it is known as vertical M&A. This type helps to heighten synergies and become more vertically integrated.
  • Concentric M&A
    The operation in which two firms that have the same customer base but trade on separate products and services join their forces is known as concentric M&A. Such a corporate transaction is executed with the motive to diversify products and achieve a competitive business edge.
  • Conglomerate M&A
    Conglomerate M&A is a business transaction in which two firms that belong to two different industries combine their forces, or one takes over the other. This is done solely with the aim to expand the customer base and reduce investment risk as the joining firms can trade on a range of different industrial products.

In order to identify which type of M&A will work the best for you while expanding your firm in India, it is extremely crucial to identify the business goals that you want to achieve in the country first. It becomes far easier if you communicate your future aims with top mergers and acquisitions firms in India.

These expert consultant professionals have garnered due experience about the intricacies of the Indian market and know the complexities of executing a transaction or business partnership in India. With extensive knowledge, they can help you decide the type of M&A that will work best for you and frame the right course of action.

5 Main Benefits Of M&A

  • A well-executed M&A operation helps to diversify the product and services and cater to a bigger customer base. It also helps to improve the distribution channel and ensure a long-term prospect for your business.
  • M&A also helps to reduce competition in a similar market place by increasing the market share and facilitating cost and revenue synergies.
  • M&A is one of the most efficient ways to acquire new talents and human resources as well as secure an enhanced accesses to technology
  • It also offers more revenue stream, which helps to diversify the risk and ensure a faster strategy implementation process.

4 Main Stages Of M&A

Having learnt about the types and benefits of M&A, now let’s have a look at the stages of implementation.

  • Deal Preparation
    This is the foremost step in which you have to identify the right strategy about how you will pursue a merger or acquisition operation. This involves studying the current market condition, identifying the target companies, deciding upon the amount of capital you can use for investment and the type of business transaction that you can proceed with.
  • Valuation and Negotiation
    The next step involves calculating the value of a target firm with the information they have provided you with. For this, you also have to evaluate the external condition and create a SWOT analysis. The very next thing is negotiating with the target firms by using the products of your valuation. In this phase, both parties have to agree on equal terms.
  • Performing Due Diligence
    Following the negotiation, you now have to perform due diligence to ensure all the details provided by the target firm is in perfect order and there are no discrepancies. For this, you have to create comprehensive financial modeling and detailed operational analysis.
  • Integration Process
    The last step is signing the final deal and taking up measures to begin the integration process. For this, you need planning on all fronts – human resource, financial, organizational, responsibilities, supply chain and more.

Being one of the top mergers and acquisitions firms in India, Tecnova offers end-to-end assistance to foreign investors willing to expand in the Indian market and ensure proper execution of all the above-mentioned steps with extensive planning. Furthermore, a thorough understanding of the diverse culture and the complicated dynamics of family-owned business structure allows Tecnova to help foreign clients frame and execute profitable business transactions and acquire suitable partners.

M&A is one of the most important and crucial steps towards consolidating sustainable business growth in India. With growing market competition, it has become a far more complicated process. External help from a reliable consultant has, therefore, become a must and cannot be neglected.

Tecnova is one of the top mergers and acquisitions firms in India that has helped more than 1400 clients across 35 countries to enter and expand their business in this nation. The company offers customized India-centric market entry strategies and M&A operations to ensure long-term success in the Indian market. It is also an exclusive member of the “Pandion Partners”, a leading international network of financial advisory firms and banking boutiques.

Reference Links:

https://www.ibef.org/news/ma-deal-activity-in-2020-jumps-33-pc-to-us-369-bn

https://www.investopedia.com/ask/answers/why-do-companies-merge-or-acquire-other-companies/

https://www.smartsheet.com/content/merger-and-acquisition-process

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