How Mergers and Acquisitions (M&A) Work

Companies merge to create single entities.

The idea is that by merging into a single company the "new" company will be more valuable than the two companies were separately.

The Board of Directors buys companies.

The Board of Directors agree to buy another company typically to fill a gap in products or services.

M&A's aren't typically a one-time cash-out deal.

Most deals have 2-3 year retention, vesting, and re-vesting programs, and potentially 2-3 year earn-outs. It's safe to assume that if you're acquired, you'll have a 2-3 year commitment to the acquirer.

M&A's can change at the drop of a hat.?

Your company may be a good fit right now, but as company priorities change, declining a deal when it's offered may mean the deal doesn't come back.

Thing don't always work out this way.

Mergers can fail because:

• Executives get spread too thin and can't focus on the company in the way they need to in order to promote growth.
• Studies show cutting costs is often the main focus right after a merger, and this can cause revenue (and profit) to decline.
• Employees from the different companies may not come together in the new environment well, causing decreased productivity and overall low morale.