Making a Merger Decision

Taking the plunge into M&A

When considering a merger or acquisition there are many factors that are important to consider. It is strongly advised to carry out thorough analysis and research to gain a good understanding of all the implications associated with the growth.

SWOT analysis in M and A

The most appropriate and common analysis you can carry out is a SWOT analysis. This analysis involves investigating the strengths, weaknesses, opportunities and threats of your business. This analysis is good because it covers all factors inside and outside the business. Strengths and weaknesses are internal aspects of your company which will give you an insight into where exactly you can improve and build on to enhance the company. Threats and opportunities are still factors that affect your business but occur externally. With a sufficient analysis of these you will be able to pinpoint what and who your threats are, which may include competition or changes in economy, for example. You will also gain useful information on what your opportunities are so that you can capitalize and gain an advantage in the market.

Gap analysis

Another analysis that will be helpful to carry out is called a Gap Analysis. This entails analysing your business at current its current position and then analysing what your goals are and where you want your company to be in the future. This will allow you to gain information to ‘bridge the gap’ and convert your strengths into achieving your goals.

Assessing economic conditions

It is very important to assess the external factors because future events and changes in the economic climate are going to have the biggest impact on your business in the future. A merger or acquisition may seem more than feasible at a present time but if the economic forecast is not favourable in the future then your business will run into financial difficulties in the long run. If the economic climate seems like it will be beneficial to your company you still have to make sure you have the appropriate amount of finance to make the acquisition or merger.

Once you have carried out a suitable analysis and considered all factors that affect your merger or acquisition should have a clear idea of what to expect from the deal. You will find out if it supports your strategy and be confident that the deal will produce a high rate of return as opposed to investing internally.

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