The merger and acquisition market (M&A) is a major component of a lot of public companies growth strategies. Large public companies that have excess cash are usually looking for acquisition opportunities to achieve inorganic growth. Most often, M&A involves two companies that are in the same field and at similar levels of the supply chain coming together to create value.

Generally, a company can purchase another for either stock, cash or the assumption of debt. The investment bank involved in the sale may sometimes provide financing to acquiring firm as well (known by the term “strategy financing).

M&A usually begins with a thorough evaluation of the target company including financial reports along with management and business plans, as well as other pertinent information. The process is known as valuation. It can be performed www.dataroomdev.blog/elon-musk-and-twitter-deal-details/ by the acquiring company or outside consultants. Typically, the company that conducts valuation must take into account more than just financial data, for instance, the fit of its culture and other factors that can affect the success of the deal.

The most common reason to conduct a merger or acquisition is to boost growth. The size of the business increases its bargaining power as well as lowering costs. Another reason for diversification is that it helps a business to withstand cyclical downturns or provide more stable revenue. Some companies buy competitors to improve their position on the market and eliminate future threats. This is known as defensive M&A.