Mergers and Acquisitions | UAB Online Degrees

Mergers and acquisitions may be complicated processes, but both can be broken down into the following actions: consolidating businesses and their assets, and transferring assets from one company to another. This is done when a business wants to reorganize into a single entity. These actions grow a business’s market share by reducing competition and diversifying products. While mergers and acquisitions are distinct in the particulars of how the target businesses come together, the overall process is very similar.

Merger Strategy

A merger is a somewhat balanced absorption of one enterprise by another which brings together resources, personnel, institutional knowledge, existing contacts and other resources under the umbrella of one of the businesses. The merger may not be a perfectly equal affair, as some personnel and assets on one or both sides of the agreement may be parted with.

However, the merger is always predicated upon the two respective boards of directors for each company seeking and receiving approval for the action from shareholders before moving forward. Each side influences the structure of the combined entity. The enlarged business formed by the two constituent companies may choose to use a new name going forward or continue to trade under an existing banner.

A merger is, in general, a somewhat more cooperative effort than an acquisition and involves two companies of similar size, although there are plenty of exceptions. Not all of the members of the board of directors or stockholders need to agree with the decision, but at least a simple majority of the decision-makers should share consensus before this transformative action.

Acquisition Strategy

Acquisitions differ from mergers on a fundamental level due to the lack of agreement by both entities before the process moves forward. With this strategy, businesses don’t always come together as a single entity. In an acquisition, the first company seeking to gain ownership of the second takes steps to acquire a controlling, majority stake.

That can happen in several ways. For example, one business may purchase enough stock to gain at least 51% of the decision-making power of shareholders. Similarly, they may acquire another company through an outright purchase of one company. An acquisition can be a hostile action — the company being acquired may not want to fall under the control of the other business. In other cases, the leadership of the two involved enterprises will want to enter into the relationship.

An acquisition is often seen in a more negative light than a merger, in part due to situations where the business being acquired is opposed to the action. The result is similar to a merger in terms of a single company being formed out of the two prior organizations, although there is less negotiation and fewer protections for the acquired entity.

Considerations for Going Forward With an M&A

Mergers and acquisitions (M&A) can be a significant and complex undertaking with substantial risk involved. Before and during the process, you must ask yourself the following questions:

How will you finance the M&A?
Which other entities may also be interested in bidding on the target company?
What is the ideal timeline for closing the deal?
How might the market affect your M&A effort?
What relevant laws do you need to review, such as antitrust laws?

At a minimum, you should also know about the required steps in the process of an M&A.

Steps in a Merger and Acquisition Process

While there will be some hurdles to deal with that are specific to the unique merger, there are some steps that are fairly standard for an M&A process, such as:

Assessment: The prospective purchaser will review an information memorandum published by the vendor. This information memorandum will provide vital information that will be needed to determine whether the target company will be a good purchase.
Negotiation: The buyer and purchaser negotiate the terms of the potential contract, considering factors such as licensing and legal matters.
Due diligence: This is carried out on the target company, and is essentially a thorough investigation into the legal and financial circumstances of the business.
Closing: Final negotiations and adjustments to the contract will be made.
Post-closure integration: Post-closure integration steps such as developing an integration team are implemented.

However, while there are standard steps, that does not mean navigating an M&A is easy.

Tips for Navigating an M&A

To navigate an M&A as smoothly as possible, it will be helpful to consider the following steps:

Redefine roles and responsibilities for yourself and your team to complement the new work structure.
Rework metrics and KPIs for your short and long-term goals.
Remain open-minded and flexible as you navigate an M&A. As is common in the financial industry, you’ll likely run into unexpected hurdles and challenges that will require creative, critical thinking to overcome — and it’s important to be ready for that, whether you’re new to the field or already experienced in business.
Communicate with your teams throughout the process so they know what to expect and how they can support the process.
Communicate with clients and stakeholders throughout the process to reassure them that the M&A is being handled strategically with the best interests of the business in mind.
Consult professionals such as those who specialize in risk assessment and network architecture to anticipate issues and restructure important systems.
Encourage your teams to develop their credentials as necessary. For example, it may be helpful for some individuals to pursue an MBA to better support their teams following the merger. Though the amount of time it takes to complete an MBA can vary, an accelerated program can often be finished in a single year.
Reimagine your company culture to reflect your updated goals and values.
Update hardware and software systems to ensure that systems are working together as seamlessly as possible. This may also be a good opportunity to update legacy systems.
Update policies and protocols to eliminate any discrepancies.

It is also important to set up systems to track growth and communicate about any issues that arise to ensure that the M&A has been implemented successfully. For example, you should establish metrics, utilize software that can map progress, and create specific channels for feedback. These should be kept in place to gauge both short and long-term progress.

M&A Career Paths

A variety of professional roles may be involved in handling mergers and acquisitions, especially managerial roles. However, there are some professionals who specialize in mergers and acquisitions, such as:

M&A Analyst: M&A analysts review potential targets for mergers and acquisitions, and also analyze market trends that may indicate ideal (or otherwise) conditions for mergers and acquisitions.
M&A Associate: M&A associate fill a managerial role in the merger and acquisition process, overseeing tasks and teams related to the merger or acquisition.
Senior M&A Professional: Senior M&A professionals are individuals who are highly experienced in many different facets of the merger and acquisition process, and often operate in a consulting role for businesses.

While there is no one set career path for becoming an M&A professional, there are some standard steps that are typically helpful on your way.

How To Become an M&A Professional

M&A professionals may be individuals who fully specialize in mergers and acquisitions and focus most of their professional efforts on these structural shifts. However, other professionals may hold a variety of specialties in M&A processes as well as other business operations. As such, there are a variety of ways that one may approach this career path, there are some common career moves that can help you on your way.

Salary and Job Outlook

The Bureau of Labor Statistics does not report on salaries and job outlook for M&A professionals, specifically. However, market research analysis is a key part of managing and consulting on mergers and acquisitions, and market research analysts made an annual median salary of $63,920 per year as of 2021. Meanwhile, this role is expected to experience 19% growth between 2021 and 2031, which is much faster growth than occupations at large.

Management is also often an important part of a M&A professional’s role. The median annual salary for management occupations was $107,360 as of May 2022. Job outlook may be particularly good for professionals who hold an MBA.

Education and Training

A bachelor’s degree at minimum in a relevant field is highly advisable for someone who is interested in a career path that may involve handling mergers and acquisitions. Many degrees related to business and finance may be applicable to this career path. You may especially set yourself up for success in the business and financial industry with a master’s degree such as an MBA. A bachelor’s program is typically four years, while an MBA program is typically two years.

There are many ways that you can gain relevant experience in this field. You may benefit from taking an internship or a relevant entry-level job. However, it may also be useful to ask your employer if you can shadow M&A professionals in their role.