Processing Knowledge

In these tough times, mergers and acquisitions (M&A) have become the talk of the town. A merger involves combination of two organizations to form a single organization while an acquisition involves buying of one company by another. Mergers and acquisitions are a complex process and involves the inputs from the financial teams of the companies involved. Lately KPOs and financial analysts such as S.G. Analytics are being used by the organizations to support them in the M&A process with their methodologies and tools.

The activities involved in the M&A process includes
1. Screening of the investments and divestitures
2. Due Diligence
3. Analysis of the Regulatory Risk

Screening of the investments and divestitures:

This process involves identification and analysis of the investment and disinvestment opportunities. This is a  cumbersome process and involves the analysis of the financial health of organization and mining the past financial records. For example in the case of an electronic goods manufacturer, the analysts would be interested in the year, location, items produced, worker count, and the number of items produced at each plant along with the plan capacity.

Due Diligence:

The process of due diligence during a M&A includes identification and assessment of the business risk.

Analysis of the Regulatory Risk:

A key roadblock in many big mergers is the possibility of a monopoly of the merged entity. Regulatory bodies do not allow mergers that result in the merged entity having a monopoly over the entire market. For example, the regulatory bodies would oppose the merger of Google and Yahoo as their combined market would result in the merged entity having a monopoly over the internet search market.

Thus one of the key activities which is creation of a detailed pitch book for the investors should not be done by only those who have mastered the art of managing mergers and acquisitions.