Strategic Rational Behind The Acquisition ?

This topic contains 4 replies, has 5 voices, and was last updated by  Andre Hamilton 2 days, 17 hours ago.

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  • #94823

    Suwinto Johan
    Participant

    What is the determinants of a merger and acquisition? Is it financial justification or any other justification ? I did a research show that the determinants of an acquisition that were the size of the assets and return on equity. The research did in financial services industry in Indonesia

    #95690

    Renata Porto
    Participant

    Hi Suwinto,
    Unless you are part of a non-profit world, financial gains will always be the ultimate goal, now the strategic move that allows for the financial gain can follow several rationales, depending on the industry/business in question. I have seen acquisitions based solely on portfolio diversification, others based on diversification of revenue streams. In the end, companies are looking to fill some sort of gap they have. The determinants you are asking about are a result of these gaps.

    #105336

    Kara
    Participant

    Coming from the non-profit world (healthcare), our most recent M&A was to help expand geographic footprint and expand our services so we now cover the whole continuum of care (birth – death). There are some synergies and cost savings that come with our combination as well as taking a proactive approach to help some of the issues in our industry (i.e. nursing shortages, re-admittance rates, small/rural locations not having support, etc.). The other M&A activities I have been involved with were to expand on other areas (Research and Chiropractic) in areas that we weren’t involved with yet. We are a strategic growth organization, so I anticipate we will continue to see M&A activity to fill gaps in our healthcare work or expand into new geographic areas.

    #107540

    Nick Picone
    Participant

    Ours tends to be strategic growth, whether in geographic expansion or product line expansion versus our competitors. Obviously, it needs to be financially advantageous, usually based on synergies through the acquisition and projected revenue growth. We tend to acquire smaller companies from the “inventor” of the product or market. It can be difficult to get a true valuation of the business and it usually comes down to common cultures and trust.

    #110568

    Andre Hamilton
    Participant

    The ultimate goal in a capitalistic society will always be financial gain. However, there are intrinsic incentives as well when engaging in deals. Some merger transactions are primarily centered around financial gain, but also have other intangible factors wrapped into the decision making process as well. There could be a certain mission statement of the firm being acquired that the acquirer wants to use.

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