You may have heard of M&A, but what does it mean? Why is it so important? In this article we’ll tell you all about it: the businesses, what it’s like to work in M&A, and of course: how to get in. We got you covered!
M&A stands for Mergers and Acquisitions. It is the process of two businesses merging into one (merger) or one business making an offer to buy another firm (acquisition). Why would a firm buy another, or merge two businesses into one? There are various reasons, and it’s mostly for value creation. The acquirer buys the shares of the target firm after doing extensive financial modelling. They also pay a mark-up on the shares. After merging, so-called synergies are created. You can see this as a less competitive market after the merger, which leads to lower production costs. Or, if a supplier and customer merge, they can eliminate bargaining costs.
How does an M&A valuation work? First you value the target as a stand-alone firm. Then you value the synergies which come from the merger. Adding both of these values will give you the acquisition value. In M&A you can have friendly or hostile takeovers. A friendly takeover will happen after approval of the shareholders and management. A hostile takeover happens when the management objects to the takeover, which will force the bidder to make a hostile offer. They will either acquire enough shares to take over control or make a tender offer directly to the shareholders.
We asked two women in our network, why they love to work in M&A.
“M&A advisors act as intermediaries between companies that demand capital and those that supply it. The work involves identifying potential targets, conducting industry research, preparing financial analyses, and developing strategies. Each deal is unique, complex, and comes with its own challenges. I find M&A exciting as it requires both analytical and strategic skills.”
– Suus van der Wijk, intern M&A.
“Working in M&A can sometimes be tough. However, the learning curve you experience as a Corporate Finance trainee is in my opinion amazing, especially since I’m only 24 years old and already have 1.5 years of experience. I like to work in a fast-paced entrepreneurial environment, and that’s (almost always) what you get in M&A. Each transaction is different. Some are easy and straight-forward, while others can be extremely challenging. That’s what makes it fun for me. Especially if you find a sector that you’re passionate about, and fits with your personality!”
– Julia de Vries, Corporate Finance trainee at ABN Amro