M&A can fail for different reasons. The main problems are focused on the following aspects, which should be considering when choosing the best company to acquire:
For all these reasons it is clear the importance acquired by the choice of the company object of the acquisition. In this sense, the pursuit of the target company or to merge. It can be structured in three steps:
- Establish the objectives of the company.
- Specify the selection criteria.
- Investigate companies that may be acquired.
1. The objectives of the company:
It is necesary establishing clear objectives to achieve in the future by merging. These objectives can be established very easily by answering the following questions:
- What sector of activity you want to grow?
- What line of products or services you want to grow?
- What markets want to grow?
- What level of activity and what market share is to be achieved?
- What level of investment and what level of funding will be needed to achieve the objective?
- What geographical area you want to grow? In the domestic market or a foreign or international market? What country do you want to grow?
- What is the level of risk being willing to endure? What economic, financial and political risks they may incur in the process of mergers and acquisitions?
2. Selection criteria:
It is necesaty establishing a list of criteria to be met by candidate companies to be acquired. In this regard, consideration must be clear criteria, investigate all companies that meet the criteria and selection, prioritize and refine your search criteria to companies that best fit the ideal profile descript. The criteria must be made or established according to three criteria:
- The criteria should be in line with the strategy of the acquiring company.
- Criteria should be based searches synergies.
- Criteria should consider the restrictions of Operation (legal, political and social restrictions, and other limitations derivate from the operation itself.
3. The research candidates:
The last step consists in the research of the companies that carry out/satisfy with the criteria selection. This process implies a complete report with all the legal, economic, market, manager, shareholders and culture data of the company.
For the 2nd and the 3rd steps it is necessary the knowledge of a specialist in M&A. (Investment banks).
En colaboración la Dra. Inés Martín de Santos.