Mergers & Acquisitions

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Mergers & Acquisitions

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Mergers and Acquisitions: What is an M&A strategy?

Mergers and acquisitions (M&A) together with divestitures typically encompass numerous types of company restructuring approaches. These can vary based on control, purpose, and other criteria.

There are many reasons that companies participate in mergers and acquisitions including eliminating competitors (through acquisition), synergy (companies operating in the same space can leverage each other's strengths, gaining competitive advantage or a larger market share, diversifying offering/services, cutting costs, etc. Prior to undergoing a merger or acquisition companies should first consider an M&A strategy.

What is an M&A Strategy?

One of the best ways to grow and gain market share is through a merger or acquisition, however, M&As are also some of the most daunting deals a firm can undertake. Deals of this size and nature can easily become a bureaucratic nightmare and are often rife with legal hurdles.  Establishing an M&A strategy that focuses on numerous elements, including a fact-based assessment of the current state, analysis and prioritization of potential opportunities, design of the future-state strategy and an execution roadmap will help your firm through the M&A process.

This comprehensive M&A overview will answer key questions you have about mergers and acquisitions including how do mergers and acquisitions work? and an overview of the different types of mergers and acquisitions.

If you are interested in discussing this topic further, please connect with us.

Acquisitions and Mergers refers to the unification of two companies or assets through various types of financial transactions (detailed below).

Mergers & Acquisitions

Want to find how our Post Merger Integration specialists can support your merger, acquisition or divestiture?

What is the M&A process?

The mergers and acquisitions (M&A) process has many steps and can take anywhere from several weeks to several months to complete. The Burnie Group has supported multiple M&As from the initial due diligence phase straight through the post-day 1 phase.

We believe that every merger or acquisition can be organized into 5 key M&A phases, these include:

1. Due Diligence and Purchase
2. Transition / Preparation for Day 1
3. Close and Day 1
4. Post Day 1 Integration
5. Business-as-usual

Mergers & Acquisitions

Do you want more information on how M&A transactions work? We can help

What does M&A look like?

Mergers and acquisitions come in all forms and shapes. In the graphic below we look at the initial forms that a merger or acquisition can take.

Invest

Mergers & Acquisitions

When two or more companies merge, they create a new entity that often benefits from both merged parts (e.g. cost position, broader product/services offering, know-how, market access etc.). There are numerous types of mergers described in detail further below.

    M&A Examples:
  • ● Disney and Pixar
  • ● Exxon and Mobile
  • ● Comcast and Time Warner Cable
Mergers & Acquisitions

Acquisition is sometimes seen as an extreme case of a merger where one company takes over another company incorporating it into it’s own entity.

    M&A Examples:
  • ● Microsoft and Skype
  • ● TransCanada and Columbia Pipeline Group
  • ● Dell and EMC

Divest

Mergers & Acquisitions

Companies often spin off creating separate entities out of divisions or subsidiaries. As a result of a spin-off, shares of subsidiaries are distributed back to shareholders as a dividend.

    Examples:
  • ● GE and Synchrony Financial
  • ● Siemens AG and Osram
  • ● Pfizer and Zoetis
  • ● Onex and Celestica
  • ● Shaw Communications and Chorus Entertainment
Mergers & Acquisitions

A Split-off is when after separating a company division or subsidiary, the stakeholders have to choose between keeping shares of the original company or changing some (or all) original shares into shares of the split-off company. As a result of a spin-off shares of subsidiaries are distributed back to shareholders as a dividend.

    Examples:
  • ● MetLife and RGA (Reinsurance Group of America)
  • ● Procter & Gamble and Folgers
  • ● Ebay and Paypal
Mergers & Acquisitions

A carve-out is a sale of a minority interest to other companies. Typically the seller gets compensated through cash inflow or other financial compensation.

    Examples:
  • ● Thomas Reuters and IP&S
  • ● Microsoft and Nokia

Want to find how our Post Merger Integration specialists can support your merger, acquisition or divestiture?

Examples of Mergers and Acquisitions

Mergers and acquisitions come in all forms and shapes. They can vary by a control degree of an acquired entity or by its purpose. The type of acquisition may often dictate the Post-Merger Integration approach and also the degree of integration. Below we expand further on the different types of mergers and acquisitions.

By control degree

Mergers & Acquisitions

This type of acquisition is often used in order to preserve and grow the existing company that already performs very well and, in particular, if it has an independent brand that carries significant value.

    M&A Examples:
  • ● Microsoft and LinkedIn
  • ● Fiat and Ferrari
  • ● Desjardins Insurance and State Farm (CAN)
Mergers & Acquisitions

A merger under equals is considered when both sides bring considerable assets into the merger e.g. from a market, product/service or capabilities perspective.

    M&A Examples:
  • ● Ernst and Young
  • ● Dow Chemical and DuPont
  • ● Exxon and Mobil
Mergers & Acquisitions

A Take-over is an example of a full acquisition (sometimes also a hostile acquisition). In this case most of the functions, and often a brand, are digested by the company that did the purchasing.

    M&A Examples:
  • ● HP and Compaq
  • ● Vodafone and Mannesmann
  • ● Aviva Friends Life (UK)

By purpose

Mergers & Acquisitions

Acquisition of / a merger with a company which competes in the same space in terms of the value chain. The main purpose here is to increase market share, drive economies of scale or Increase presence in other geographies.

    M&A Examples:
  • ● Daimler Chrysler
  • ● Marriott and Sheraton hotels
  • ● Groupon and Citydeal
Mergers & Acquisitions

Acquisition of a company or a merger with a company in way that both companies complement one joint value chain.

    M&A Examples:
  • ● Timewarner Cable and Turner
  • ● KPMG and Secor Consulting in Canada
Mergers & Acquisitions

Acquisition of / merger with a company which is active in a partly or entirely different space. These are called respectively mixed or pure conglomerate mergers.

    M&A Examples:
  • ● P&G and Gillette
  • ● Walt Disney and ABC
  • ● Microsoft and LinkedIn
Mergers & Acquisitions

Acquisition of a public company via a private company with the purpose of using the public company as a shell. By merging both companies, the private company becomes public without IPO. It is a cheaper and faster alternative to making a company public.

    M&A Examples:
  • ● Aérospatiale and Matra
  • ● Atari and JT Storage
  • ● ABC Radio and Citadel Broadcasting Corporation

How our Post Merger Integrations services can help you

A very significant part of mergers and acquisitions fails to deliver on expected benefits. Integration of any merger or acquisition should be planned and executed with accuracy and precision in order to deliver expected benefits. The heavy-lifting comes after the deal closes.

Our PMI experts have extensive experience in setting up integration governance, putting in place structures required for successful integration and working hand-in-hand with your teams to define all elements of the target state in details and executing towards this plan. Simultaneously we will make sure that you deliver on estimated benefits and extract the value of your M&A deal.

Want to find out how our Post Merger Integration specialists can support your merger, acquisition or divestiture?