5 Common M&A Mistakes and How to Avoid Them

According to a KPMG study, attempted mergers have a failure rate around 83 percent. Other research shows a different  rate of failure, but it's always above 50 percent, which means you're up against some serious challenges when you step into the M&A waters. CEOs and companies that want to hedge as many bets as possible can learn from common M&A mistakes so they can avoid or mitigate as many hurdles to success as possible.
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Before the IPO: 5 Items CEOs Should Have in Order

Going public doesn't always go well, and even the biggest brands can stumble when leaping this hurdle. In 2013, for example, Twitter scored huge with the fourth biggest IPO of the year, while social giant Facebook floundered with unexpectedly poor performance on the first day. Even IPOs that break records on day one aren't necessarily success stories, though (it works the other way, too, as the eventual Facebook success shows). CEOs can take action to help hedge bets leading into an IPO. Here are five areas that should be in order before going public.

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What Is Amalgamation?

In many mergers and acquisitions, one company takes over the business of another, and the second company ceases to exist as an organization. That's known as absorption. Sometimes, though, there are enough benefits associated with a completely new brand or legal entity that two companies combine to form an entirely new entity. That process is known as amalgamation.

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A Look at Leveraged Buyout in M&A

Leveraged buyouts are trending up across the globe, and in 2017, the U.S. saw an increase in the volume of leverage loans of 53 percent. While records for leveraged buyout volume were set in the aughts and again in this century, it's not a new financial tactic for entities that want to acquire brands without tying up existing capital. In fact, one of the largest leveraged buyouts in history occurred in 1989, when KKR leveraged assets and raised a total of $55.38 billion to purchase RJR Nabisco.

Today, both target companies and potential investors should understand leveraged buyouts because it's one of the financial options that can support a successful acquisition. It's also a tactic that some acquiring organizations use to procure companies even when the target company doesn't sanction it (aka, during a hostile takeover).

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Tuck-in vs. Bolt-on Acquisitions

Tuck-in and bolt-on acquisitions typically occur when a larger, private-equity backed entity absorbs a smaller one during M&A activity, often in an attempt to gain specific skills or product capabilities or an expanded market. While the two acquisition types are similar on the surface -- and many people use the terms interchangeably -- slight differences in intent and the way the acquired assets are treated can be seen between tuck-in and bolt-on transactions.

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The Difference Between Growth Capital and Buyout Capital

As other economic factors continue to stabilize after devastating drops during the early aughts, trends in private equity investment continue to trend up slowly over time. Venture capital investments, for example, rose from around $15.59 billion in the United States in 2002 to approximately $71.94 billion in 2017. Typically, these are investments in startups and young, innovative brands, but larger target companies also continue to see investor interest. In these cases, it's more likely specialty investors with the right resources are interested in providing either growth capital or buyout capital.

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M&A: 5 Different Due Diligence Types Explained

Mergers and acquisitions involve an enormous effort and spend every year -- upwards of $2 trillion in the United States annually -- but throwing money at the transaction doesn't make it successful. According to the Harvard Business Review, between 70 and 90 percent of all M&A activity fails. HBR points the finger for these failures, at least partially, at poor research and due diligence.

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A Look at M&A Merger Types

It's rarely the case that mergers and acquisitions are as simple as either of the two parties would like. Even when both companies agree to perform the transaction, they still "compete" to make sure that their interests will be preserved once the deal has finished.

Whether you've just started considering selling your business or you're currently in the midst of a merger, we could all use a refresher on the different types of M&A transactions. Below, we'll go over each of the three most common structures for M&A transactions: asset purchases, stock purchases, and mergers.

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The Role of an M&A Lawyer

Lawyers play a critical role in a number of different business transactions. Some lawyers have highly specialized skills in one particular facet of the law, whereas others serve in a more general capacity. Given the complexity and impact of mergers and acquisitions (M&A), there are many lawyers whose practice is entirely devoted to these sorts of deals. It takes a lot of hard work and oversight to ensure that a deal runs smoothly and closes in a timely fashion, so hiring seasoned counsel for M&A is an absolute necessity. Here is what an M&A lawyer will do:

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Going Public vs. Staying Private

The lure of initial public offerings (IPOs) can be tempting and an exciting time. Businesses can benefit from the increased capital, market exposure, and growth potential, but there are risks. Companies lose their privacy when they go "public". On the other hand, taking businesses private can save money but can decrease the capital that a business needs. Before going public or private, businesses should weigh the pros and cons thoroughly.

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