How to Monitor Mergers and Acquisitions for Competitive Intelligence - dummies

How to Monitor Mergers and Acquisitions for Competitive Intelligence

By James D. Underwood

Regardless of the type of market you’re analyzing with your competitive intelligence efforts, you’re likely to see mergers and acquisitions as companies jockey for position. Keep a close eye on both because the type of merger or acquisition often reveals what a competitor is planning for the future. Here’s a breakdown of the types of mergers and acquisitions you may see:

  • Market share merger: Some companies merge simply to expand market share, which may involve merging regions or product lines.

  • Critical mass focused merger: In some industries, advantage can be gained from size; for example, allocating fixed costs to more product units. In others, purchasing raw materials in greater quantities lowers production costs.

  • Pure acquisition buy: One company may buy another to form a new company that’s capable of growing market share and generating more profits than the two original companies working separately. The goal of a pure acquisition buy may range from improving the product portfolio to acquiring new product pipelines to expanding the talent pool.

  • Strategic buy: Companies typically execute strategic buys to purchase capabilities they don’t already have, which are key to remaining competitive and are expensive to develop from scratch. Strategic buys are common among some of the new technology companies, when buying a technology costs less than trying to develop a competing technology from scratch.

  • Technology buy: A company acquires another firm that has a technology they want. Japanese companies often buy American companies to acquire technology.

    If you observe a company paying significantly higher than market price to acquire a company, you’re usually looking at a strategic or technology buy.