Merger and Acquisition in Iran
Strategic acquisition which is also known as an “acquisition strategy”, is a method that one company acquires to
purchase another firm, hoping the consolidation of both companies can prove to be more profitable than one by itself.
A merger strategy is basically to combine one company with another company and operate them as one legal entity. The companies that agree to mergers are typically equal in terms of size and scale of operations. The process of merger and acquisition which is also known as M&A strategy can be quite stressful and a professional consultant should be involved to control the situation and propose solutions for the difficulties of this process.
4 Types of Mergers and Acquisition
1. Horizontal: horizontal merger is a merger between companies with similar services or products
2. Vertical: Vertical merger is a merger that consolidates the supply line of a product or a service and it’s one of the most common types of M&A strategy.
3. Concentric: concentric merger is a merger between companies who have similar target markets with different products
4. Conglomerate: conglomerate merger is a merger between companies who offer diverse products or services.
Benefits of Mergers and Acquisition in Iran
Mergers and acquisitions are more successful when they achieve a valuable objective. Some benefits of M&A strategy are mentioned below:
1. Strategic merger and acquisition can lower potential risks for a business company, especially for smaller and local businesses, because it allows them to remove some burdens of managing a single company on their own. M&A strategy can lead to professionals from both companies working together to meet a common objective.
2. It may be easier to secure financing rates with acquisition strategy than other types of purchases because right after an acquisition occurs, companies can gain higher financial growth rates. M&A strategy can lead to a secure and simple finance.
3. A company buys another business because the acquisition costs less than it would to develop a technology, expertise, or product from scratch. Therefore, by using M&A strategy in Iran they can acquire better Technologies, Expertise, Products, and Resources.
4. Breaking into a new market can be challenging for many new business owners, or even for established businesses. While setting up another branch is always an option, a merger or acquisition can save companies a significant amount of time, effort and energy and enter them in new markets in Iran right away.
Merger and Acquisition’s challenges in Iran
The economics in Iran is not stable one. Iranian market experiences fluctuations in its rates every day. Merger and acquisition strategy can be a perfect choice for many small businesses in Iran in order to stabilize its finances and improve its technology. Some important elements for a successful merger and acquisition in Iran are:
1. Mutually Beneficial Deal
Both companies approaching an M&A strategy should gain something, even if it is only avoiding a less preferable alternative. If it looks like one company is gaining a lot more than it is giving up, then that might be a warning that one party may not be fully committed to the deal. So equal compromise is essential for a successful M&A strategy in Iran.
2. Alignment with Future Plans of both companies
A Merger and acquisition in Iran is a strategic endeavor which means both parties must have a clear vision of how it will benefit both the acquiring and the selling company. Also, each side in the deal must have a clear view of what its company will be after the process of M&A.
Evaluating the M&A target in Iran
1. Financial Value of the Target: The financial value of a target is the value of a target company and its assets. To put it in a nutshell it is what a company is worth. The financial value of a target may be less or more than a buyer is willing to pay for it and the buyer should choose whether it is profitable to buy or not.
2. Value of the Assets to the Buyer: This is more subjective than the financial value because buyers can differ significantly in their valuation of assets.
3. Resale Value of the Target: This is what a buyer thinks they can get when they resell their newly acquired assets in simple words.
Different merger and acquisition strategies in Iran provide multiple levels of change for companies. To choose your merger and acquisition strategy in Iran wisely, you should consult with a professional consulting company to get a unique perspective on the advantages and drawbacks. You can consult with Blue Butterfly experience as one of the best management consulting in iran companies . Do not overlook the importance of M&A strategy in Iran, for with this strategy you can improve our business and services.
A merger strategy is basically to combine one company with another company and operate them as one legal entity.
Horizontal / vertical/ concentric/ conglomerate
1. Financial Value of the Target
2. Value of the Assets to the Buyer
3. Resale Value of the Target