How to Grow a Business Through Mergers & Acquisitions
Legend has it, that Bill Gates once has a business meeting with Marc Andreessen, the co-founder of Netscape. Netscape was the first company to attempt to capitalize on the emerging World Wide Web. But not far behind, as being an early internet browser, Internet Explorer was not very far behind as a competitor. Bill Gates (hypothetically) told Marc Andreessen: “I could either buy you or bury you”. That’s the simplest way to put it. Mergers and acquisitions are all about combining companies (mergers) and taking over one (acquisition).
There are 7 proven strategies for business growth. In this seven series blog post, we’ll share anecdotes and assets needed to execute. Here, we are kicking it off sharing the mergers and acquisitions strategy.
But back to the story. Of course, Gates was not bluffing, since Microsoft was the operating system that Netscape came installed on. If Netscape did not want to sell to Microsoft, Gates threatened to let it load on Microsoft program. Andreessen decided not to sell, got sued, and was the biggest antitrust internet battles in the 90s. Mergers and acquisitions, whether they are done amicably or forcibly, come down to buying assets or market share from competitors. Every mergers and acquisitions project should commence with a buy or build analysis. If it’s cheaper for a firm to build its own competing product, it is cheaper and less risky to do so. However, if a firm cannot build a competitive product, then they should consider buying if the price is right. Business evaluations in part of acquisitions - also have to know what you are buying. It is generally, not a good idea to buy talent and customers because they can leave. When buying, you want to buy proven processes, fixed assets, and technology.
Mergers & Acquisitions with Proven Processes
Selling a developed company that goes through multiple stages before acquiring the end goal for both parties (buyer/seller), can be a proven process. So, the story is that Barbara Corcoran didn’t always grow up as rich as she is now. Once she hit her 20’s, she decided to quit her job as a waitress. Yes, that’s right, a waitress. In order to start her New York City real estate brokerage business with just a $1,000 loan. What happened in the end? Well, she later sold The Corcoran Group (her proven process) for $66 million in 2001 (MarketWatch). Here's a quick blog on another process (the customer scale) that should be considered and help expand businesses, as well.
Mergers & Acquisitions with Fixed Assets
Moving onto Amazon. One of the most valuable companies in the world announced on June 16th, 2017, that the company was going to buy the organic grocery store, Whole Foods. A case that bought fixed assets would be the purchase of Whole Foods by Amazon, which their commercial leases and brand name go along with it. By partnering with Whole Foods, it allows Amazon to expand its multichannel offering and further enhance the customer experience (The Conversation). This reminds us of another quick blog on horizontal integration and when it's time to move onto big steps in the sales process. A comment from the Amazon Founder himself to why Whole Foods was the one:
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy”, said CEO Jeff Bezos.
Mergers & Acquisitions with Purchase of Technology
One of the biggest social media platforms - Facebook. One of the most popular search engines/web browsers - Google. What do these two big companies have in common? Their purchase of other technology companies, such as Instagram and Youtube.
Facebook Worth: $148 billion
Back in April 12, 2012, Facebook purchased the social media photo and video sharing platform for a whopping $1 billion. The worth of Instagram today? Oh just at least $100 billion, nothing too crazy according to Bloomberg.
Google's Worth: $300 billion
On October 9, 2006, Google purchased the video sharing site for $1.65 billion. The worth of Youtube today? According to AdWeek, researchers have said between $26 billion and $40 billion. They added that it might be potentially more valuable than Twitter's current $30 billion valuation.
Successes of Mergers & Acquisitions
At the end of the day, these are the key three suggested types of purchases businesses should keep in mind when considering the mergers and acquisitions strategy. Looking back, these are all successful big companies and people, so why shouldn't businesses give it a try? With the right people and tools, businesses can go far with merging with companies or taking over acquisitions.
Here's a video with further explanation of not only the mergers and acquisitions strategy but the other six, in order to expand the growth of a business.
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