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What is Mergers and Acquisition?

Businesses seek to merge with or acquire another business when they have to generate value and consolidate position in the face of increasing competition, potential opportunity or following a change in its strategic direction. Finding the right fit for M&A is very essential to ensure that the deal’s outcome is favorable. Notwithstanding the right fit target, each stage of the transaction process has to be managed carefully to ensure that the deal goes through without a glitch. This calls for professional expertise to supplement internal resources as well as to gain an objective opinion on the transaction.

What is the Difference Between Merger and Acquisition

A merger is the combination of one or more corporations, or business entities, into a single business entity. This is so as to achieve greater efficiencies of scale and productivity, sales and marketing, and in administering the business. The existing companies’ stocks are surrendered, and the new company’s stocks are issued in its place. A merger can be classified as horizontal (two companies in direct competition), vertical (a company and its supplier or customer), a conglomeration, product-extension, and market-extension.

An acquisition is when a strong (or large) company buys a weak (or small) company(s) to create a more competitive, cost-efficient company. From a legal point of view, the smaller company ceases to exist, and the buyer absorbs the business. The large company’s stock continues to be traded while the small company’s stock ceases to exist.

Why Companies Do Mergers and Acquisitions (M&A)?

When companies come together they can achieve cost efficiencies in the delivery of goods and services, sales and marketing, and the administration of the business. In a nutshell, they can take advantage of synergistic opportunities in the following four domains:

  • Economies of scale – size matters.

    A large company placing large orders has the leverage of negotiating large discounts from its suppliers. This will affect every department of the company and may include everything from electricity bills to marketing and advertising.

  • Staffing efficiencies

    While some mergers and acquisitions may lead to retrenchment, they can ensure better staff utilization, thus improving the company’s productivity. The new company is able to have a healthy-looking balance sheet with all the money saved due to enhanced efficiency in selected departments.

  • Expanding the market reach

    Mergers and acquisitions is a very effective tool when a company wishes to penetrate new markets and grow its revenues. It expands the newly-formed company’s distribution and marketing channels while presenting new sales opportunities at the same time. Acquiring a company that already serves the geographical area you want to reach, is a far better option than trying to grab a foothold in that market through aggressive marketing.

  • Accessing new technology

    Google acquired YouTube, or Facebook acquiring WhatsApp, are classic examples of this. Instead of spending millions of dollars on research and development, and that too in a field where you have already lost the first-mover advantage, large companies prefer to buy-out the proven technology. This way, they get to stay on top of technological developments and maintain their competitive edge.

What can InCorp M&A Services Do For You

At InCorp, we help our clients identify opportunities for strategic fit and also help them navigate the regulatory and tax maze involved in deals that are made across borders. We work with them through all stages of the M&A process so that they are able to build value and strengthen their competitive position in the industry.

As noted in the KPMG study, almost 83 percent of all M&As fail due to poor communication, flawed intentions, lack of management foresight, inability to overcome practical challenges, loss of revenue momentum, or because of external economic factors. We are here to make sure you are 17 percent.

It is important to note that there are a few things you need to take care of to get your company ready to be merged or acquired. This includes cleaning up the balance sheets, getting all financial statements audited, discontinuing poorly-performing products, cutting down fringe benefits, and removing any conflict of interests. Do remember that businesses or corporates will expect to see a professionally-run business when they do their initial due diligence, and only then will the merger be ratified.

Our Business Advisory service experts will guide you in every step of the way – as described above – to ensure a successful M&A.

We provide the following M&A advisory services:

  • Synergy Analysis
  • Financial and Tax Due Diligence
  • Financial Statement Analysis
  • Transaction Compliance Analysis
  • Deal Structuring
  • Equity Fundraising
  • Management Buy-outs and Buy-ins
  • Initial Due Diligence
  • Preparation of Information Memorandum
  • Negotiation
  • Business Valuation
  • Exit Strategy

Contact Our Singapore Team

Alton Neo

Alton Neo

Group Chief Operations Officer

Director – Co-Head of Advisory and Outsourcing

Let us execute your M&A successfully

Contact Us