Whether to draw up your company's growth strategy based on in-house resources or seek to achieve your goals through M&As is a key business decision.
Seek to understand the merits of achieving your goals through acquisitions to develop a fruitful growth strategy.
Speed up the growth of the existing business
Bringing in new knowhow and resources from the outside can become the basis for dramatic growth.
Internal growth usually requires significant outlays of time and money on tasks such as recruitment, R&D, and the acquisition of new customers. By incorporating external growth through an M&A, faster growth can be sought from a different perspective.
Reduce entry-related risks
When venturing into a new business area, entry risks may be reduced by incorporating a company with a proven track record.
Trying to create something out of nothing, as in a new business, is risky and things may not progress according to plan. In the case of an M&A, the assets necessary for running the business, including human resources, are often ready. Plans can also be developed based on past results, which helps reduce the risks associated with entering a new business area.
Create synergy benefits
Your ability to negotiate with suppliers will improve. Synergy benefits, such as the acquisition of new distribution channels, can also be expected.
Internal growth generally requires investing ample time and funds in hiring, R&D and the acquisition of new customers. Incorporating external growth through an M&A will allow you to consider how to speed up growth from a different perspective.
Keys to a successful acquisition
Understanding of and measures related to corporate culture
One of the keys to a successful M&A is understanding of corporate culture. There are cases of post-acquisition business operation leading to failure because the buyer fails to understand the acquired company's corporate culture and implements its own policies, drastically changing the environment so that employees and stakeholders find it hard to cope, resulting in lower revenue than expected. The key is to sustain "invisible assets" such as corporate culture and relationships with stakeholders, including by examining whether to have the acquired company's executives remain involved with management for a certain time.
The difference between selling price and corporate valuation
When an M&A is planned, a financial advisor (FA) will calculate a valuation for the company being sold. This valuation is a "theoretical value," calculated based on the limited amount of information available at that time. While the theoretical value is used as reference, the "relative selling price" will ultimately be decided by the seller and buyer. As the buyer's responsibility to explain its actions to shareholders and other interested parties becomes heavier when conducting an M&A, when calculating a corporate valuation, it is necessary to use multiple methods to determine whether the selling price is within appropriate bounds.
Formulation of corporate strategy and clarification of targets
There are cases in which the buyer has yet to determine a specific aim for its M&A activities, but receives a proposal regarding an unrelated company from an M&A service, ultimately leading to failure in post-acquisition business operation. Before examining M&A proposals, it is important that your company develops a corporate strategy and clarifies what assets it is looking to acquire through an M&A. There are two main targeting methods: one is to acquire a company with room for improvement on the cheap and then raise its value by utilizing your company's know-how, while the other is to acquire a company with attractive assets and know-how of its own for an appropriate price, and use it to improve the value of your company's existing business.
Learn more about the features of the M&A Plus service.