Occasional Acquistion
Over the last several decades, mergers and acquisitions have become a staple of American business as a way to expand into new markets, add products to existing offerings and fill capability gaps of all sizes and descriptions. Notwithstanding all those years of experience, however, mergers and acquisitions generally don't work very well. Generally speaking, more than two out of every three fail — and do so in a rather short amount of time.
The M & A Paradox is: Why does an activity with such a low level of success continue at such a high level of activity over such a long period of time? The question can be examined in several parts:
- What causes the failure rate to be so high?
- If we know the reasons behind the failures, why do we keep making those same mistakes?
- If there are explanations, why we can't seem to avoid the mistakes? Why do we keep doing M&A?
There are risks associated with spending scarce financial and human capital to acquire companies to fill gaps in your corporate strategy, and there are also risks in doing nothing at all. The Chesterfield Group can help you explore alternative ways to build relationships with target companies to fill the gaps, while avoiding many of the risks associated with an actual acquisition of that target. We will guide you through a structured process of analysis, including the following steps:
- Developing the shared objectives of the acquiring company and the target company.
- Examining the strengths and competitive advantages that each party brings to the table in pursuing those shared goals.
- Setting out the constraints of each party relating to these objectives.
- Placing the proposed arrangement in its environment, including an analysis of the industry structure, competitive situation, environmental trends and industry success factors.
- Considering all the above, exploring various Collaborative Business Structures that might offer alternatives to an acquisition that could achieve the goals without the issues generally associated with an acquisition.