Intelligent M & A: Navigating the Mergers and Acquisitions Minefield, 2nd Edition

CHAPTER 5Identifying the Best Targets

The reasons for doing an M&A deal are clearly dependent on the context of the business, the dynamics of the environment, future strategic intents, and the personal motivations of senior management. Some companies, for example, may need to acquire in order to increase their market share, to expand quickly into new markets, to gain access to scarce resources, to keep up with their competitors, to reduce the number of their competitors, or even just to increase their sales growth or profitability. So, for example, private equity firms by and large only look for targets with operational and/or financial inefficiencies that can be turned around. In the case of some large industrial firms operating in mature industries with minimal growth opportunities, they can only expand through acquisitions.

Whatever the case is, these motivations will define the approach taken to acquisition planning: each company must make their corporate development strategy explicitly and directly based on these motivations. In this way, they will have clear working guidelines split over different time lengths about their strategic intent, where they wish to expand, and even where they would like to divest. This strategy must be both realistic and personalized to the company. It will identify where there are holes that cannot be filled through organic growth and must be filled with acquisitions or mergers.

Strategic vs. Opportunistic Deals

As noted earlier, all mergers and ...