Question

Mergers & Acquisitions advisory services are complex, but financially attractive products of banks. Please describe your perspective on the most relevant preconditions, required elements and essential success factors an advisory bank has to offer supporting its customer when acquiring a new product segment from direct competitor (A).

Answer 1

The most relevant preconditions and elements required for providing merger and acquisition advisory to the customers would be the performance of the economy and the target company in question. An acquirer would like to acquire a company for as low amount as possible and a target company would like to be sold at the highest price possible. Hence, unless it's a hostile takeover, it generally means that the merger will only take place when the share price of the target company is high. This means that the economic condition of the industry and the economy as a whole should be good so that the company's share prices would be high. Apart from that, other requirements for a successful merger to take place will be the synergy between the two companies. The merger will be beneficial only and only when there is some incremental benefit to the two companies working together. It can be in the form of reduced costs or supplementary product or any other kind of synergy.

The most essential success factor that an advisory bank has to offer is its credibility in doing such transactions. Mergers and acquisitions are transactions which require the acquiring company to completely trust the advisory bank. This trust can only be gained if the banks have a good track record of doing these transactions before for other companies.