Mergers and acquisitions between privately held companies entail numerous legal, human resources, business, finance, and intellectual property issues. As such, successfully navigating the sale or acquisition of a company requires understanding the process involved, even with a business sale specialist or a business acquisition broker by your side.
No matter what your transaction processes or plans are, having the necessary information on deal categories can help you assess what the future state of the combined business will look like and its implications. It will also allow you to conduct high-level due diligence.
Here are some common M&A deal categories you should know of.
There are two types of conglomerate transactions—pure and mixed. In pure conglomerate transactions, the firms involved have nothing in common. On the other hand, in mixed conglomerate transactions, the firms involved are looking for a market or product extensions.
This involves an organization adopting the strategy, structure, processes, and systems of another. These are sought out if either organization wants to improve its financial strength, boost capacity utilization, and increase negotiating power with its customers and suppliers.
A horizontal M&A allows firms that produce similar goods or services to reduce costs and improve operations by leveraging synergies related to excess capacity.
A vertical M&A allows firms to contribute some of the raw materials contained in a final product to improve their production processes, take more control of the supply chain, and increase leverage with suppliers and distributors.
This category eliminates both firms’ strategies, structures, processes, and systems and implements a new operating model that synthesizes their organizational, cultural, operational, and systems components.
Much like transformation, this category involves the synthesizing of disparate business components into a whole new one. The goal is to enact efficient structures, systems, and processes for each of the companies involved, so they can benefit from a more productive operating model.
This enables individual companies to share leadership, financial assets, and strategy with each other while preserving their autonomy, the value of their business units, and operational independence.
Roll-Up Or Bolt-On
This is similar to a Vertical M&A category. The only difference is that it often involves multiple transactions as the acquiring company pursues its roll-up strategy.
If you’re thinking about selling your business or buying a business for sale in South Carolina, New Jersey, Ohio, Pennsylvania, Georgia, Florida, Massachusetts, or other areas of the US, partner with Gulfstream Mergers & Acquisitions.
Our reputable M&A advisory firm has decades of experience in the business helping numerous clients settle mergers and acquisitions successfully. We help you maximize the deal’s value to ensure your success in the future. Contact us for more information or call at 1-704-892-5151 to find out more about our services.