NWTA

703.579.7702

NWTA

703 579 7709

NWTA

Mergers & Acquisitions

Assist in all phases of the acquisitions and mergers process. We also coordinate or provide support for procurement and implementation of all technology systems.

Our Process

We will partner with your business leaders and assist them during all phases of the acquisition process ranging from proformas, due diligence, conversion mapping of legacy systems and enterprise applications, and create and/or update reporting structures. We will also coordinate and/or provide support for the procurement and implementation of items such as:

Types of Merger & Acquisition Transactions

  1. Horizontal: Two companies that operate in similar in industries. These two companies may or may not be direct competitors.
  2. Vertical: Occurs when a company and its supplier merge together. The end goal is for the company to improve its supply chain. 
  3. Conglomerate: Companies, in unrelated industries, want to merge for diversification reasons. 

Forms of Merger and Acquisition Integration

  1. Statutory:  The acquirer is larger than the target company. This larger company will inherit the target’s asses and liabilities. On top of that, the target company will no longer exist as a separate entity. 
  2. Subsidiary: The target company maintains its business, but it becomes a subsidiary of the acquiring company.
  3. Consolidation: When the companies merge, both companies cease to exist and form a new entity. 

Reasons for Mergers and Acquisitions

  1. Unlocking Synergies: The most common reason is to create synergies. This means the combined company becomes worth more than the two companies separately.  
  2. Higher Growth: A company can grow by merging or acquiring with a company that already has the latest technology and a successful process. It typically the fastest way a company can achieve higher revenues. 
  3. Stronger Market Power: This occurs during a horizontal merger and it allows the new company to attain a higher market share and gain the power to influence prices. It can also occur in a vertical merger because the company will then have more control of its supply chain, thus avoiding external shocks in supply. 
  4. Diversification: When a company operates in diversifies its portfolio, it helps them avoid significant losses during a slowdown in an industry. 
  5. Tax Benefits: Tax benefits occur when one company receives significant taxable income, while the other incurs tax loss carry forwards. 

Forms of Mergers and Acquisitions

  1. Stock Purchase: The acquirer pays the target firm’s shareholders cash and/or shares in exchange for shares of the target company. Consider the following:
    • The acquiring company absorbs all the assets and liabilities of the target company.
    • May be a long process because the target company’s shareholders must approve the transaction through a majority vote.
    • Shareholders bear the tax liability. 
  2. Asset Purchase: The acquiring company purchases the target company’s assets and pays them directly. Consider the following: 
    • The acquiring company will avoid assuming any of the target company’s liabilities. 
    • Typically, no shareholder approval is required.
    • Compensation received is taxed at the corporate level.
  3. Methods of Payment: Stock and cash are the two methods of payment. The payment can consist of one or the other or a combination of the both. 

Valuation Methods for Mergers and Acquisitions

  1. Discounted Cash Flow (DCF) Method: Target company’s value is calculated based on its future cash flow. 
  2. Comparable Company Analysis: The value is determined by relative valuation metrics. 
  3. Comparable Transaction Analysis: Metrics for past comparable transactions within the industry are used to determine the value. 

Check out this article that highlights key actions to take during a merger and acquisition. 

Get in touch with our team of experts!

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