What is Mergers & Acquisitions?

Merger is combining of two companies to form one, while acquisition is one company taking over the other. M&A is one of the major aspects of corporate finance world. The main reason being M&A is that two companies together create more value compared to being individual. With the objective of wealth maximization, companies keep evaluating different strategies through merger or acquisition.

Mergers & Acquisitions can take place by:

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• buying assets

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• buying common shares

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• exchange of shares for assets

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• exchanging shares for shares

Types of Mergers:

Conglomerate

Companies involved in this have totally unrelated business activities. There are two types of conglomerates: pure and mixed. Pure are firms involved have nothing in common, while mixed are firms that are looking for product extension or market extensions.

Horizontal Merger

Horizontal merger is a consolidation, where two firms operating in the same market, often as competitors offering same goods or services. This merger happens in industries with fewer firms, as competition tends to be higher and the synergies and potential gains In market share are much greater for merging firms.

Market Extension Mergers

This merger happens between two companies who deal in the same products but in different markets. The purpose of this is to make sure that the merging companies have access to a bigger market and bigger client base.

Product Extension Mergers

This merger takes place when two business organizations that deal in products that are related to one another and do business in the same market. This merger allows the merging companies to group together their products and get access to bigger consumer market. This helps in earning higher profits.

Vertical Merger

This is a merger between two companies who produce different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry’s supply chain, merge operations. The logic behind this merger is to increase synergies created by merging firms that would be more efficient operating as one.

Reasons for Mergers and Acquisitions:

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• Financial collaboration for lower cost of capital

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• Improving company’s performance and fast-track growth

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• Economies of scale

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• Diversification for higher growth products or markets

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• To increase market share and positioning giving larger market access

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• Strategic realignment and technological change

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• Tax considerations

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• Undervalued target

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• Diversification of risk

How we can help?

Premier Brains work with entrepreneurs in the SME market to help them assess the true commercial potential of their planned acquisition and understand how the purchase might serve their longer- term strategic goals. Through our highly experienced team coupled with our research based approach, we offer seamless access to a full range of transactional and other advisory services to ensure you get maximum value from your deals.

Some of the key areas where we work and add value are as below,

1. Due Diligence
In a seller’s market, transactions are fast-paced; deals are closed with less information than is ideal, and the risks are high. In a buyer’s market, risk is weighed more carefully. Private equity and strategic buyers have significantly different requirements around due diligence. A financial buyer’s interest may be limited to only those risks that impact valuation, whereas corporate buyers need to consider factors that have long-term implications. Providing due diligence for this dynamic marketplace requires real-world, practical, and tactical experience. At Premier Brains, we’ve developed a comprehensive road map to guide clients through the M&A process.

2. M&A Project Management Office (PMO)
The success of any merger or acquisition requires a flawless process and a deep understanding of critical business issues from multiple perspectives. Premier Brains has proven capabilities in providing project management from an enterprise level, coordinating the legal, IT, and finance functions.

3. Post Merger Integration
The global component of a merger or an acquisition often proves to be a stumbling block to a smooth transition. Differences in culture, workforce compensation, and local regulations are just a few of the issues a deal can face. We have resources in place and on the ground with firsthand knowledge and experience in overcoming global barriers and ensuring seamless integration.

4. Buying a business:
We work with you to evaluate if the target company adds value to strategic growth of the business.

5. Private equity advisory
We offer solutions from initial investment to performance improvement and growth to exit, for private equity houses, private equity-backed companies and management teams seeking private equity investment. We help advise on business structuring to attract private equity interest.

6. Exit strategy services
We can project manage and implement the sale or closure of your underperforming or non-core corporate entities.

7. Performance improvement
We can help in reviewing and applying independent approach to improve your business processes, implement new business strategies, divest/closure of non-core businesses and design new capital structures.

8. Valuations
We provide an independent view on value for you if you are considering a merger, acquisition or restructuring, or if you require support for a proposed financial structure.

9. Selling a business
Many business are essentially dependent on most important people in the company who normally are the shareholders. In order for a business to be sold, a going concern without the current shareholders is very critical factor. We assist businesses in the core competitiveness and advising on structuring the business to make it a salable business so highest payout can be secured from the same.

10. Raising finance
We can help management teams, corporates and private shareholders raise private equity and/or debt finance.

11. Financial reporting
We will consolidate newly acquired businesses into group accounts (including breaking out recognisable intangible assets from goodwill).

Some of the world’s largest companies, and many smaller ones, owe much of their success to the benefits derived from mergers & acquisitions (M&A). The M&A refers to a business strategy of purchasing or combining companies to achieve cost savings, expansion, an improved capital structure and other goals. A deal can involve an acquisition, which is a 100% purchase of a target company. A merger is a combination of two companies into a single entity.

Please note that this memo is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the
topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.

If you would like to discuss Accounting & Audit services, please drop us an email at info@premier-brains.com or call us at + 971 4 3542959.

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