Mergers & Acquisitions


What Is a Merger or Acquisition?  

A  merger or acquisition is one of the most significant corporate  events  for a company, an action that becomes stamped in its history  forever.  In an atmosphere of increased competitiveness, this strategy common  for both small and large businesses.

The  intention behind such a move or decision is unique to every  business,  but is based on the principle of creating more value (after  combining)  than the individual companies are worth individually. The  additional  value created by the merger or acquisition process is called synergy.  Though it sounds simple, the whole process of a merger, takeover  or  acquisition to create synergy (financial benefit) is daunting. It   involves large sums of money, paperwork, government regulations,   legalities and accounting procedures.

The  merger or acquisition deal process can be intimidating and this  is  where the merger and acquisition firms step in. They will facilitate   the process by guiding their clients (companies) through these   transformative, multifaceted corporate decisions — for a fee.

The  various types of merger and acquisition firms are discussed  below. The  role of each type of firm is to help successfully seal a deal  for its  clients, but they do differ in their approach and area of  focus.

Investment Banks

Investment  banks perform a variety of specialized roles. They carry out  transactions involving huge amounts of capital in areas such as  underwriting. They act as a financial advisor (and/or broker) for  institutional clients, sometimes playing the role of an intermediary.

Investment  banks also facilitate corporate reorganizations,  including mergers and  acquisitions. The finance division of investment  banks manages the  merger and acquisition work, right from the  negotiation stage until the  deal closes. The work related to the legal  and accounting issues is  often outsourced to affiliate companies or enlisted experts.

The  role of an investment bank in the process typically involves  providing  vital market intelligence and preparing a list of prospective  targets.  Once the client is sure of the targeted deal, an analysis of  the  current valuation  is done to know the price expectations. All the  documentation,  management meetings, negotiation terms and closing  documents are handled  by the representatives of the investment bank. In  cases where the  investment bank is handling the selling side, an  auction process is conducted with several rounds of bids to determine  the buyer.

Some of the major investment banks are Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan Chase (JPM), Bank of America Merrill Lynch (BAC), Barclays Capital, Citigroup (C), Deutsche Bank (DB) and Credit Suisse Group (CS).

Law Firms

Corporate  law firms are popular among companies looking to expand  externally  through a merger or acquisition, especially companies that   cross international borders. Such deals are more complex as they  involve  various laws governed by different jurisdictions,  and require very  specialized legal handling. The international law  firms are best suited  for this job with their expertise on  multi-jurisdiction matters.

Some of the leading law firms engaging in mergers and acquisitions are Wachtell, Lipton, Rosen & Katz, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), Cravath, Swaine & Moore LLP, Sullivan & Cromwell LLP, Simpson Thacher & Bartlett LLPLatham & Watkins LLP and Davis Polk & Wardwell LLP.

Audit & Accounting Firms 

These  companies also handle merger and acquisitions deals with an obvious  specialization in auditing,  accounting and taxation. These accounting  firms are experts in  evaluating assets, conducting audits and advising  on tax considerations.  In cases where a cross-border merger or  acquisition is involved, the  understanding of the tax implications  becomes critical. In addition to  audit and accounting  specialties, these companies have other experts  available to manage the  other financial aspects of the deal as well.

Some of the well known firms from this category with specialized services in mergers and acquisitions are: KPMG, Deloitte, PricewaterhouseCoopers (PwC) and Ernst & Young (EY). These companies together are often referred to as the "Big Four" accounting firms.  

Consulting & Advisory Firms

The  leading management consulting and advisory firms guide clients  through  all stages of a merger or acquisition process, whether they   are cross-industry or cross-border deals. These firms have a team of   experts who work towards the success of the deal right from the initial   phase to the successful closure of the deal. The bigger companies in   this business have a global footprint that helps in identifying  suitable  targets. The firms are tasked with working on the acquisition  strategy  followed by screening, due diligence, and advising on price  valuations to make sure that the clients are not overpaying and so on.