New York Times reports that mergers are making a comeback
In an article posted by the New York Times on February 15, 2013, the “Mega-Merger” is back, meaning that companies are joining forces (rather than one purchasing another) in order to do some sort of specific deal. Examples they include are Warren Buffet and Brazilian investors purchase of Heinz for $23 billion and the merger between American Airlines and US Airways valued at $11 billion.
Mind-boggling numbers, I know. However the concept isn’t far fetched. In the case of the American Airlines and US Airways deal, consider the potential; they will now be the largest airline in the world (big kudos!), the airlines, combined, have a larger customer base, greater reach around the world, they can potentially combine what they have learned in the marketplace and technologies to give them strategic advantage over other airlines, the people, the knowledge and the physical assets. Of course, a merger like this doesn’t come without hiccups or potential issues: as with any business, failure rates can be quite high, but for those that are successful, it can be a bright new day.
As a business leader, thinking about growing your company, you essentially have two options: you make it – do it internally, or you buy it. It some cases, it certainly does make more sense to make it – in house. However, you must take into consideration what the real cost will be, how much time it will take to get to market and if there is an actual market for what you are doing.
In the “buy” arena, you may find that there is a company existing in the marketplace with whom your company has complimentary skills. Ideally, the sum of what the two companies could potentially bring to market is greater than the whole. It should be more than a product offering; like in a marriage, it should be a shared vision with shared values. You need to be able to come to the table on equal footing, with both parties having opportunity to gain, which moves both companies toward a single end-zone.
Business leaders and companies – especially smaller ones – seem to miss out. With all of the potentially that exists in the marketplace, it seems as though mergers would be a very attractive avenue to pursue. The cost is much lower than an acquisition or hiring staff that could be potentially unproductive, the benefits of technology, knowhow, product offering, customer base, etc., could potentially increase the level of service and potential revenue for both companies. The number of competitors is reduced in the marketplace, assuming that each company would have tried to build an deploy offerings that would have been competition for one another, etc..
I am looking forward to hearing your thoughts on mergers and acquisitions, why they would or wouldn’t work for your company and what avenues and/or pitfalls you see.
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