Mergers and Acquisitions

Chapter 2. Candidate Search and Qualification

Introduction

Strategic Considerations

Merger and acquisition (M&A) activity has its roots in the strategic planning process. An output of that process is the identification and articulation of specific strategic objectives. These objectives typically reflect the need to enhance the company's product portfolio and/or improve its infrastructure capabilities and efficiencies. (The strategic planning process may also identify business units that no longer fit or support the company's strategy, and these units may be earmarked for divestiture. See Chapter 8 for a more expansive discussion of divestitures.)

Specific strategic objectives are peculiar to the individual company but, generically, they focus on these areas:

• Developing or acquiring new products for current markets

• Expanding the distribution channels for existing products

• Developing or acquiring new products for new markets

• Achieving economies of scale in order to lower production costs

• Increasing brand recognition of products and/or services

• Developing or acquiring new technology, intellectual property, or research and development (R&D) capability

• Establishing control over sources of supply by expanding operations toward suppliers' markets (backward integration)

• Expanding operations toward customers' markets (forward integration)

Once its strategic objectives are articulated, the company must decide whether those objectives will be pursued organically (i.e., through internal development) or ...