Mergers & Acquisitions Integration Handbook, 2nd Edition

CHAPTER 2Mergers and Acquisitions 101 and Assessing Integration Complexity and Risk

In this chapter, you will learn:

• The nature of M&A and why companies do deals
• Understanding transaction types and integration scope
• Assessing integration complexity and risk

MERGERS AND ACQUISITIONS 101

Mergers and acquisitions (M&A) are a big part of the corporate finance world. Every day, investment bankers, private equity firms, and companies arrange M&A transactions to bring separate companies together to form larger ones. Deal valuations can be in the millions or even billions of dollars. However, they all require some degree of post-deal support to make them work, and that is what this book is about.¹

A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which a new company may not be formed, though it may be rebranded. Sometimes an acquisition of a company of near equal size can be called a “merger of equals,” but that’s more of a term that one might find used for a press release about the deal versus a technical M&A term.

The common scenarios for companies undertaking a merger or an acquisition include the following:

• A company cannot achieve targeted sales growth organically.
• A company wants to take capacity out of the market (i.e., create industry consolidation).
• A company wants to expand its portfolio of products and services (i.e., create business diversification).
• The merger or acquisition is an opportunistic ...