Enhanced Business Synergy via Mergers and Acquisitions
Within our industry, which is currently experiencing much merger
and acquisition (M&A) activity, there is little doubt that
M&As are being driven by over capacity issues in some segments;
the generalised fear of future technological developments; the cost
of capital equipment; and the difficulties involved in financing,
globalisation and the fast-changing economic landscape. The
rationale for M&A activity can be particularly alluring in
uncertain or tough times.
In essence, a merger occurs when two companies combine into one entity - either 'horizontally', when two companies combine having shared similar product and service lines and markets, or 'vertically', when a company merges with a customer or supplier.
The prevailing business view is that bigger players will out-survive smaller operators in this more competitive global world and M&As can create a more competitive, cost-efficient company.
Sometimes M&As don't work and the motivations which drive them are unsound. Incompatibility issues may come into play, as well as unforseen obstacles and diversion from core day to day activities and running the business.
M&As have captured the imagination of many owner operators within our industry and a number of high profile groups have found that the best way to get ahead is to continue to grow their own businesses via sound marketing practices whilst expanding operations and ownership boundaries through M&As.
For the new entity which evolves out of the combined smaller entities, enhanced business synergies can produce improved equipment and staff utilisation, cost efficiency, borrowing capacity, buyer power and enhanced revenues. In these cases, M&As can result in cutting of costs and boosting revenues by more than the cost of purchase. The theory is that the merged entity can become more profitable than each of the merged firms individually.
The success of M&As ultimately depends on how realistic the M&A makers are and how well they can integrate the two companies whilst maintaining the day-to-day cash flow and core viability of their current operations.
For M&A activity to be considered a success, the M&A should increase shareholder value faster than if the firms were not combined. Heidelberg's Business Development unit has expertise and tools that can assist in analysing the outcome of a M&A.
Further Information
Darren Davies
General Manager - Business Development
Tel. +61 3 9205 4180
Fax. +61 3 9205 4211
Email: Darren.Davies@heidelberg.com
In essence, a merger occurs when two companies combine into one entity - either 'horizontally', when two companies combine having shared similar product and service lines and markets, or 'vertically', when a company merges with a customer or supplier.
The prevailing business view is that bigger players will out-survive smaller operators in this more competitive global world and M&As can create a more competitive, cost-efficient company.
Sometimes M&As don't work and the motivations which drive them are unsound. Incompatibility issues may come into play, as well as unforseen obstacles and diversion from core day to day activities and running the business.
M&As have captured the imagination of many owner operators within our industry and a number of high profile groups have found that the best way to get ahead is to continue to grow their own businesses via sound marketing practices whilst expanding operations and ownership boundaries through M&As.
For the new entity which evolves out of the combined smaller entities, enhanced business synergies can produce improved equipment and staff utilisation, cost efficiency, borrowing capacity, buyer power and enhanced revenues. In these cases, M&As can result in cutting of costs and boosting revenues by more than the cost of purchase. The theory is that the merged entity can become more profitable than each of the merged firms individually.
The success of M&As ultimately depends on how realistic the M&A makers are and how well they can integrate the two companies whilst maintaining the day-to-day cash flow and core viability of their current operations.
For M&A activity to be considered a success, the M&A should increase shareholder value faster than if the firms were not combined. Heidelberg's Business Development unit has expertise and tools that can assist in analysing the outcome of a M&A.
Further Information
Darren Davies
General Manager - Business Development
Tel. +61 3 9205 4180
Fax. +61 3 9205 4211
Email: Darren.Davies@heidelberg.com
