Mergers and acquisition (M&A) according to Bloomberg Business refers to the process of one company financially controlling another company. If the two companies are somewhat the same in size, they may be said to have merged. If a larger company goes for a smaller one, it is said to have acquired or bought out the smaller one.
According to their video on YouTube, Madison Street Capital advises clients on both the buy side and sell side of M&A transactions.
A company should not buy out another unless they have a good business reason for doing so. In many cases these days, the purpose is to gain control over some technology or business asset the other company owns. In many cases it’s cheaper to buy the company than to develop it independently, reinveing the wheel. Large high tech companies such as Microsoft and Google have all used their accumulated profits to buy out small start-up companies with some service that has proven highly popular in the marketplace.
In many cases, the owner of the smaller company has been hoping for that outcome. They are happy to receive many millions of dollars from the corporate giant, and to walk away wealthy and free of the responsibility for running the company.
In other cases, it may not work. There’s the story of Mark Zuckerberg attending a meeting in the early days of Facebook when a large tech giant wanted to buy him out. He told them he obviously didn’t want to sell, so they wouldn’t need to talk for more than five minutes.
The key is in the video where it says managers are seeking to strategically enhance the organization values. Whether one company is buying another out, or they both bring important and useful business assets to the table and therefore decide to merge, the end result must be a business that makes more money.
People must be able to work with each other. The leaders of each company must have similar visions and be willing to work together, or for one to leave. The organization must be better able to grow and meet its goals because of the deal.
Madison Street Capital is an investment firm specializing in advising small and mid-level firms on their financial needs. Their headquarters is in Chicago, but they have offices in Africa and Asia as well. Madison Street Capital help clients who need financing.
They may need help with capital restructuring to attract new investment capital. Or they may need to have their asset valued for purposes of analyzing their financial needs.