By Shaun Murphy
Mergers and acquisitions firms provide services that must support your company’s strategy in order to be successful. In this context, “strategy” is in relation to your method of realizing your ambitions for your company. Not only must a company define the markets in which it shall compete, it must distinguish itself from the competition in order to surpass its competitors.
A successful strategy usually strives to establish leadership economics by making their costs lower than those of their competitors. This, in turn, allows them to drive their own prices, become widely recognized, and stand out from the competition which then allows for better overall performance. One measurement of this, for example, is return on capital, where the more successful company surpasses the others in one or more areas.
An additional trait of a good deal is that it gives you the ability to strengthen your company or fix existing problems in your current business. An acquisition can make your product portfolio broader or stronger geographically, demographically, and in means of distribution.
It can open supply chain assets to your company or introduce new proprietary research. Although one company’s portfolio may not be a good fit for a business, under the so-called “parenting advantage,” that business may fit very well into another company’s portfolio.
Often, for acquiring companies, looking at a deal from the angle of scale in relation to scope provides them with perspective regarding the value a possible acquisition will provide their company for the long-term.
In scale deals, the target company and the inquiring company face a high level of overlapping business, which can strengthen the company as it expands in its current business. In scope deals, the target business is a similar business but completely separate, which opens the acquiring business to a unique market, channel, or product line. Scope and scale deals both can serve valuable purposes and there has been rich debate between the two. Contact us at our Palm Springs mergers and acquisitions firms to begin your consultation with our experienced lawyers.