Boosting Growth: The Benefits of M&A and How to Leverage Them

The rapidly evolving business landscape we operate in today is reflected in constantly evolving business structures. With new markets and services developing at unprecedented speed, forms of business consolidation have become more common than ever. If you haven’t already, you will likely face a merger or acquisition sooner rather than later.

While M&A processes can be complex to navigate, temporarily increase pressure on the workforce, and put an organization’s processes to the test, the positive windfall that can come from successfully navigating them is invaluable. Knowing the benefits of mergers and acquisitions and understanding how to leverage them will put you and your company in a privileged position when the time comes, boosting your growth and success.

In this post, we discover how to do just that, but first, let’s define the playing field.

What are mergers and acquisitions?

Mergers and acquisitions are two different types of business consolidation processes. While they both involve different organizations coming together in a new and unified form, they are not the same.

• Mergers involve two companies combining to form a new entity, blending their assets, staff, and operations to create a unified organization.
• Acquisitions occur when one company purchases another, taking ownership of its operations and assets, effectively absorbing the acquired company into its business structure.

The importance of M&A for small and medium enterprises

Mergers and acquisitions are important for businesses of all sizes but can be especially impactful for small and medium enterprises (SMEs) looking to grow rapidly and explosively. For many SMEs, organic growth can be a slow and competitive process. Rapid growth, however, is often a non-negotiable necessity in today’s business landscape.

M&A provide quick routes to scaling operations, diversifying product lines, and entering new markets. These routes can help businesses achieve the exponential growth they aim for. They are particularly beneficial in industries where scale is crucial to reducing costs and increasing bargaining power with suppliers and customers, but they must be approached strategically.

Careful planning, rigorous due diligence, and a clear understanding of these processes’ strategic benefits and risks are mandatory requirements for success. Moreover, careful integration plans and strategic foresight are necessary to navigate the complexities of merging different corporate cultures, systems, and processes.

The good news is that it doesn’t have to be difficult; this is how we do it at Deel and help other companies succeed.

The strategic benefits of mergers and acquisitions

As companies grow and competition gets more fierce, M&A become increasingly common tools to help boost success and stay on top of the market. Data confirm this, with a staggering 91% of the top 100 companies strategically using consolidation projects, according to a McKinsey study.

Despite their complexity and relative risk, the popularity of these tools is due to their significant benefits, which can exponentially boost success. Here are some of the most impactful.

Expansion of market reach

Mergers and acquisitions provide a fast track for businesses seeking to expand their market reach. Through strategic M&A, a company can acquire a strong foothold in new geographical locations or customer segments.

This eliminates the barriers to entry and costs associated with establishing a presence in those markets organically and provides immediate access to an established customer base. Moreover, M&A facilitate the sharing of customer networks between the combined entities, potentially increasing market penetration and sales opportunities by leveraging cross-selling and up-selling strategies that cater to a broader audience.

Better access to resources

Mergers and acquisitions open access to valuable resources that can significantly boost a company's efficiency and competitive edge. Businesses can immediately access advanced technologies, specialized talent, and unique intellectual properties by integrating with or acquiring another company. This integration accelerates innovation and enables the adoptive company to enhance its product offerings and streamline operations.

Accessing these new capabilities can lead to the development of better solutions and services, keeping the company ahead in a rapidly evolving market. Such strategic resource acquisition is crucial for maintaining relevance and driving long-term success in competitive industries.

Improved economies of scale

Merging with or acquiring another company facilitates economies of scale, resulting in significant cost savings through operational synergies. Combining resources allows the merged entity to streamline operations, reduce duplicate functions, and optimize supply chains.

Additionally, integrating technological and human resources can enhance productivity and efficiency, reducing overhead costs. Such synergies not only decrease expenses but also improve financial stability and competitive advantage, making the new entity more resilient in the marketplace.

Increased financial power

Mergers and acquisitions often increase financial power by pooling the financial resources of the involved companies. This consolidation can enhance the financial stability of the merged entity, providing a stronger capital base to support ambitious growth and expansion projects.

With greater financial resources, companies can more easily invest in research and development, new technology, or market expansion strategies that might otherwise have been unfeasible. Enhanced borrowing capacity and improved credit ratings are additional benefits that can arise, further enabling the business to leverage opportunities for scalable growth and operational enhancements.

Leveraging mergers and acquisitions for growth and development

The most successful companies use M&A programmatically and strategically to boost their growth, and we’ve seen why. What makes or breaks the success of these processes, however, is their ability to meticulously plan all the complex elements of the puzzle, from legal compliance to cultural integration, and ensure contingency plans are in place for each possible scenario.

Here are some key points to consider when planning an M&A built to succeed.

Conduct due diligence

Thorough due diligence is critical in the M&A process. It ensures that the potential partners align strategically when it comes to long-term goals and culture. This detailed investigation must also assess financial health, operational compatibility, and the potential risks of merging with or acquiring another company. It allows businesses to make informed decisions, anticipate challenges, and strategically plan for integration to maximize the value and impact of the acquisition.

Actionable tips

• Review financial statements: Thoroughly examine past financial performance to assess stability and profitability.
• Evaluate cultural fit: Understand the corporate culture to foresee integration challenges.
• Analyze customer base: Assess the compatibility and potential synergies of both customer bases.
• Examine legal compliance: Ensure the target company meets all regulatory requirements to avoid future liabilities.
• Assess technology and infrastructure: Identify overlaps and gaps in technology and infrastructure that can impact operational efficiency.

Define clear objectives and strategic planning

Establishing clear, attainable goals for the post-merger phase is crucial in providing direction and purpose, aligning both companies under a unified strategic vision. This planning must ensure resources are optimally allocated, integration issues are anticipated, and potential conflicts are managed efficiently.

Actionable tips

• Develop a joint vision: Create a shared vision statement that reflects the objectives of the combined entity.
• Set detailed goals: Outline clear, measurable targets that align with the overall business strategy.
• Create integration roadmaps: Design detailed integration plans with timelines, responsibilities, milestones, and checkpoints.
• Monitor progress: Establish regular check-ins to assess the integration progress against the set goals and adjust strategies as necessary.

Facilitate cultural integration

Combining two distinct corporate cultures can pose significant challenges but also offer an opportunity to create a richer, more dynamic organizational culture. Carefully managing this integration is vital as it affects employee morale, retention, and, ultimately, the productivity of the new entity. Leaders must strive to merge the best aspects of both cultures, fostering an environment of inclusion and cooperation.

Actionable tips

• Conduct cultural assessments: Evaluate the corporate cultures of both companies to understand key differences and similarities.
• Engage in open communication: Maintain transparency with all stakeholders throughout the integration process to manage expectations and reduce uncertainties.
• Establish integration champions: Designate leaders who embody the desired cultural traits and can effectively guide teams through the change.
• Organize team-building activities: Facilitate events and workshops that promote understanding and cooperation among employees from varying cultural backgrounds.

Promote innovative collaboration

Mergers and acquisitions create unique opportunities for innovative collaboration by combining the two companies’ strengths, technologies, and intellectual assets. This can ignite a powerful synergy that drives innovation faster than either company could achieve on its own. By integrating diverse technologies and knowledge bases, businesses can harness creative solutions and develop breakthrough products or services that distinctly position them in the marketplace.

Actionable tips

• Establish joint innovation teams: Create cross-company teams focused on developing new ideas and leveraging combined technologies.
• Share best practices: Regularly exchange knowledge and insights between teams from both companies to foster learning and improvement.
• Implement technology integration programs: Develop a structured approach to integrate and optimize technologies from both companies.
• Organize innovation workshops and hackathons: Host events encouraging employees to collaboratively explore creative solutions to business challenges.

Three strategies to optimize people management and workforce integration during M&A

Having full oversight of complex projects like M&A can be tricky. It’s easy to focus all attention on the most immediate financial and compliance-related challenges, sometimes overlooking other aspects of the project, such as people management.

However, ensuring a seamless workforce transition is crucial to the success of your M&A, and streamlined people operations that account for the different consolidation steps and expected scaling steps will ensure more enthusiastic support of the project, higher efficiencies, and a seamless transition.

Below are three critical strategies you can employ in your people management to ensure your M&A delivers the best results.

Engage in proactive communication

Proactive communication is vital to the success of these consolidation processes and serves as the cornerstone of successful integration. It ensures transparency and maintains trust by informing employees about changes, future vision, and expectations. Moreover, effective communication mitigates uncertainty and resistance, facilitating a smoother transition by aligning all stakeholders with the new corporate goals and culture. Furthermore, it encourages immediate feedback, which can be critical in addressing concerns and fostering a sense of inclusion and value among employees.

Actionable tips

• Establish open channels: Set up dedicated communication channels for ongoing updates and feedback.
• Regular updates: Schedule regular meetings and updates to keep everyone informed throughout the integration process.
• Transparent leadership: Encourage leaders from both companies to communicate key messages and updates personally.
• **Feedback mechanisms: **Implement systems for employees to share their input and concerns, ensuring they feel heard.
• Cultural sensitivity: Tailor communication strategies to fit both organizations’ cultural norms and values, respecting diversity.

Prioritize employee retention

Any big transition will cause some friction. However, retaining key employees is crucial, as they are integral to the success and continuity of the new enterprise. Effective employee retention strategies can reassure staff and reduce turnover, helping to maintain operational stability and preserve valuable institutional knowledge. Open communication, recognition of employee concerns, and clear articulation of new roles and opportunities are essential to smooth these transitions and reinforce the value of existing talent within the merged entity.

####Actionable tips

• Offer retention bonuses: Provide financial incentives to key employees to stay through the transition period.
• Create career development plans: Show employees a clear path for growth and training in the new company structure.
• Involve employees in transition planning: Engage staff in decisions about the merger to create a sense of ownership and belonging.
• Maintain company culture: Blend the best aspects of both cultures to build a cohesive, supportive work environment.
• Offer flexibility: Ensure the burden of the transition does not fall on the shoulders of your workforce. Offer flexible work options and facilitate employee relocation when needed.

Invest in leadership and training

Investing in leadership and development training is critical during M&A processes to ensure a smooth transition and fully harness the potential of the new business structure. Effective training equips leaders with the strategies and skills to manage change, address cultural integrations, and foster a positive workplace environment while mitigating the uncertainties that often accompany M&A activities. However, training and growth programs should not just be limited to leaders. Ensuring all workers have access to career development opportunities and training throughout the transition will also heavily influence the enthusiasm and motivation of all those involved in the M&A.

Actionable tips

• Customize training programs: Design training sessions that address the specific challenges and objectives of the merger or acquisition.
• Focus on soft skills: Emphasize communication, teamwork, and leadership skills that are essential for navigating post-merger integrations.
• Create leadership cohorts: Develop groups of leaders from both companies to foster networking, share best practices, and build a supportive leadership community. -** Implement continuous learning:** Establish learning opportunities to adapt to evolving needs as the integration progresses.
• Monitor and evaluate: Regularly assess the effectiveness of training programs and adjust as necessary to improve outcomes and boost morale.

Not sure how to start putting these strategies into practice? Approach your HR consolidations by following the steps below, and start building effective and future-proof HR operations.

Supercharge the success of your next with Deel

As we’ve seen so far, sound and proactive preparation can be the key to avoiding common challenges of consolidation processes and leveraging their benefits into faster growth and more impactful success. Deel’s global payroll and employer of record (EOR) services can help ensure your workforce’s seamless transition to a new corporate structure or entity.

To learn more about using an EOR to support an international transaction, download your free resource on how to de-risk Global M&A using an Employer of Record. The guide includes:

• What an EOR is and the services it provides
• EOR use cases for M&A (with examples)
• Crucial components of a successful global
• The M&A process with Deel
• And more!

Get your guide today or book a 30-minute product demo with an expert to learn more about how Deel can support your next merger or acquisition.