Balanced Scorecard Benchmarking Business Process Reengineering Collaborative Innovation Core Competencies Customer Relationship Management Customer Segmentation Decision Rights Tools Downsizing Growth Strategy Tools Knowledge Management Lean Six Sigma Loyalty Management Mergers and Acquisitions Mission and Vision Statements Online Communities Outsourcing Price Optimization Models Scenario and Contingency Planning Shared Service Centers Strategic Alliances Strategic Planning Supply Chain Management Total Quality Management Voice of the Customer Innovation Related topics Merger Integration Teams Strategic Alliances Description Over the past decade, Mergers and Acquisitions (M&As) have reached unprecedented levels as companies use corporate financing strategies to maximize shareholder value and create a competitive advantage. Acquisitions occur when a larger company takes over a smaller one; a merger typically involves two relative equals joining forces and creating a new company. Most mergers and acquisitions are friendly, but a hostile takeover occurs when the acquirer bypasses the board of the targeted company and purchases a majority of the company's stock on the open market. A merger is considered a success if it increases shareholder value faster than if the companies had remained separate. Because corporate takeovers and mergers can reduce competition, they are heavily regulated, often requiring government approval. To increase chances of the deal's success, acquirers need to perform rigorous due diligence-a review of the targeted company's assets and performance history-before the purchase to verify the company's stand-alone value and unmask problems that could jeopardize the outcome. Methodology Successful integration requires understanding how to make trade-offs between speed and careful planning and involves: Setting integration priorities based on the merger's strategic rationale and goals; Articulating and communicating the deal's vision by merger leaders; Designing the new organization and operating plan; Customizing the integration plan to address specific challenges: Act quickly to capture economies of scale; redefine a business model and sacrifice speed to get the model right, such as understanding brand positioning and product growth opportunities; Aggressively implement the integration plan: by Day 100, the merged company should be operating and contributing value. Common uses Mergers are used to increase shareholder value by: Reducing costs by combining departments, operations, and trimming the workforce; Increasing revenue by absorbing a major competitor and winning more market share; Cross-selling products or services; Creating tax savings when a profitable company buys a money-loser; Diversifying to stabilize earning results and boost investor confidence. Related Bain capabilities Mergers & Acquisitions M&A strategy Acquisition screening Strategic due diligence Merger integration Divestitures Joint ventures and alliances Selected references Ashkenas, Ronald N., and Suzanne C. Francis. "Integration Mergers: Special Leaders for Special Times." Harvard Business Review, November 2000, pp. 108-116. Bruner, Robert F., and Joseph R. Perella. Applied Mergers and Acquisitions. Wiley Finance, 2004. Cooper, Cary L., and Sydney Finkelstein (eds.). Advances in Mergers and Acquisitions, Volume 6. Elsevier JAI Press, 2007. Frankel, Michael E.S. Mergers and Acquisitions Basics: The Key Steps of Acquisitions, Divestitures, and Investments. John Wiley & Sons, Inc., 2005. Gaughan, Patrick A. Mergers: What Can Go Wrong and How to Prevent It. John Wiley & Sons, Inc., 2005. Gole, William J., and Paul J. Hilger. Corporate Divestitures: A Mergers and Acquisitions Best Practices Guide. John Wiley & Sons, 2008. Harding, David, and Sam Rovit. Mastering the Merger: Four Critical Decisions That Make or Break the Deal. Harvard Business School Publishing Corporation, 2004. Harding, David, Sam Rovit, and Alistair Corbett. "Avoid Merger Meltdown: Lessons from Mergers and Acquisitions Leaders." Strategy & Innovation, September 15, 2004, pp. 3-5. Lajoux, Alexandra Reed, and Charles M. Elson. The Art of M&A Due Diligence. McGraw-Hill, 2000. Lovallo, Dan, Patrick Viguerie, Robert Uhlaner, and John Horn. "Deals Without Delusions." Harvard Business Review, December 2007, pp. 92-99. Schweiger, David M. M&A Integration: A Framework for Executives and Managers. McGraw-Hill, 2002.