Mergers and acquisitions (M&A) is a process where companies come together to form a new company, or one company buys another company. The goal of M&A is usually to create value for the shareholders of the two companies involved in the deal. There are many different jobs in the world of M&A, and each one offers its unique challenges and opportunities. If you’re interested in pursuing a career in M&A, then this article is for you. We’ll take a look at some of the most common jobs in this field, and we’ll also discuss the skills and qualifications you need to succeed in them. Let’s get started!
1. What Are Mergers and Acquisitions?
Mergers and acquisitions are the combination of two or more companies to form a new company. A merger can be described as one company taking over another, while an acquisition is when one company acquires all of the assets or shares of another. These transactions are usually driven by financial motives to create value for the shareholders involved. They can be categorized by how they affect the shareholders and markets involved:
For example, when two companies merge to form a new one, all of the shareholders in each company become shareholders in the combined entity. The new board decides what proportions their shares will have in the newly formed company, and once this is done, they can begin trading under a single name.
When the shareholders in one company buy all of the shares in another, then they’re buying it “in its entirety.” They will often appoint a new board and management team once this is done.
An acquisition can be friendly or hostile depending on how it’s done:
For example, when two companies merge to form a new one, it’s called a friendly merger. On the other hand, when one company buys another without the permission of its board or management, then it’s referred to as a hostile takeover.
2. What Kinds of Companies Are Involved?
There are many types of companies that can be involved in M&A activity. Some of the more common ones are:
Large companies that are on the Fortune 500 list often make acquisitions. This can be to expand their product portfolio, enter new markets, reduce competition or increase market share. For example, when AT&T bought DirecTV.
Medium-sized companies want to become prominent by acquiring other smaller ones to compensate for their lack of size.
Startups or smaller companies that want to acquire larger ones to increase their market value. This can be attractive for investors, who may get more money by selling the company than holding on to it. For example, when Facebook bought WhatsApp.
Any company wants to become another company because it has a different business focus, product portfolio, or geographical reach. For example, Dow Chemical merged with DuPont to create the world’s largest chemical company.
3. What Are Some Common Types of Mergers and Acquisitions?
There are many different forms that M&A can take on. Some of the most common ones are the following:
A reverse merger is when a private company buys an already listed one. This can help the buyer gain capital markets to finance its operations.
The opposite of a reverse merger, when a public company buys another public company. This is usually motivated by increasing earnings per share to increase the stock price.
A merger between companies that operate in different geographical regions or industries creates new market opportunities. For example, when Anheuser-Busch InBev bought SABMiller.
Two companies merge to form one larger company. This is most common with technology firms because of the large amount of capital required to switch from minor to prominent. For example, when Google bought Motorola Mobility.
When one company buys another to expand its capabilities in terms of technology or manufacturing, this can be done by acquiring new machinery and equipment for production, or it could also include research & development facilities. For example, when Tesla Motors bought Grohmann Engineering.
4. What Is a Career in Mergers and Acquisitions?
Working in M&A means taking part in the buying and selling of companies. This can be done by either advising interested parties on what to do or helping with negotiations between buyers and sellers.
Most of the activity takes place within investment banks because they are the ones that will advise clients on what to do, including how much their company is worth. Other participants in this industry are lawyers, accountants, and consultants.
These professionals need to understand how their client’s businesses work, including their finances, product portfolio, and market position. This information is then used when advising them on the best way forward.
M&A professionals can specialize in specific industries or parts of the process, such as:
Due Diligence – The process of investigating a potential target to determine if it makes sense to pursue the deal further.
Mergers & Acquisitions – Advising companies on how much a business is worth and negotiating the terms of a deal with potential buyers.
Corporate Finance – Working with both buyers and sellers in the process of making the deal happen.
Mergers & Acquisitions (M&A) is also a popular area of focus for MBA students because it combines business with finance, strategy, and leadership. It allows professionals to get involved in the entire process from beginning to end, rather than specialize in one specific part, which can be more difficult when working in smaller companies.
5. What Education Is Required for a Career in Mergers and Acquisitions?
While it’s possible to enter this field with a bachelor’s degree, many professionals go on to earn an MBA or specialized master’s degree. These are especially attractive to employers since they show the candidate has more advanced skills thanks to their coursework and research.
Professionals can also pursue a Ph.D. in business administration, statistics, economics, or finance to provide the quantitative skills needed for financial modeling. With this advanced education, it is possible to hold senior positions within an organization.
6. What Are Potential Earnings Once Employed in Mergers and Acquisitions?
Because there are so many different factors that contribute to a company’s value, there is no specific set rate for careers in M&A. According to the Bureau of Labor Statistics, professionals in this sector made a median annual salary of $180,120 May 2015.
That being said, salaries can vary by location and experience, with the highest earners usually located on the east coast of the United States.
Also, this field is considered part of the finance industry, which means professionals can receive bonuses or other incentives on top of their base salary. Those working for private equity firms may also be eligible for carried interest if they make deals that result in profits.
7. How Do I Start a Career in Mergers and Acquisitions?
The education and experience needed for a career in M&A vary by employer and seniority. A bachelor’s degree is usually required, but an MBA or other advanced degree can improve employment opportunities depending on the industry.
In addition to formal education, professionals need to gain some work experience before considering jobs that involve high-level negotiations. This can be done by working in the investment banking or finance industry and will also help develop communication and problem-solving skills.
Since M&A professionals need to understand company finances and operations, it is beneficial to pursue additional education such as an MBA or specialization in this field through an advanced degree program.
8. What Does It Take to Become an M&A Advisor?
An advanced degree and experience in the finance field can help professionals get their foot in the door. Many companies also require applicants to pass a certification exam before they are considered for employment – this is especially important since there are no set guidelines on what professionals need to learn.
Some of the more common certifications include the CMA (Certified Management Accountant), which is offered through the AICPA, and the professional valuation qualification, which is provided by the National Association of Certified Valuators and Analysts.
9. What Are Some Potential Career Paths in Mergers and Acquisitions?
Once professionals have established themselves inside an organization, they could advance into higher positions like the director or vice president of finance. This type of experience is beneficial to future career paths, and the MBA programs taken during this time will provide more skills that can be used in other areas.
Some professionals choose to take jobs with private equity firms where they not only negotiate deals for businesses but also help find companies that are looking to be acquired. Others choose to build relationships with certain companies and leverage these relationships when making deals.
10. Are There Other Job Titles That Work with Mergers and Acquisitions?
M&A professionals often need the help of specialized finance experts, so accountants, tax specialists, lawyers, and financial analysts are also employed by organizations involved in this practice.
What are some of the biggest challenges for professionals in mergers and acquisitions?
One of the main challenges that M&A professionals face is establishing a company’s value. For example, running an auction to find out what potential buyers are willing to pay requires knowledge not only about financial statements but also an understanding of how specific business operations work.
Another challenge is the size of some transactions. If a company is to be sold for several billion dollars, there can be legal and tax implications that make this type of negotiation even more complex.
11. What Are Some Potential Drawbacks to a Career in Mergers and Acquisitions?
Since this is an industry based so heavily on finance, job security can be challenging to maintain for those working there. This is especially true during economic downturns when the market loses some of its lustrous.
Also, due to the high demand for M&A professionals, many companies will only hire those who have proven themselves with an MBA or other advanced degrees. This means it’s possible that some candidates may not get the opportunity to work in this field until later on in their careers.
12. What Advice Would You Give Someone Interested in Pursuing a Career in Mergers and Acquisitions?
A professional who wants to focus on M&A should not only seek out positions in finance and study up business practices and public accounting. Even though this type of job is often multi-faceted, financial professionals need to understand how different aspects of the operations work together.
When an organization makes an M&A deal, they are purchasing another company’s equity, cash flow, and even liabilities. Without knowing how to value these assets, it isn’t easy to make a good deal for all parties involved.
A career in mergers and acquisitions requires a significant time commitment on professionals. Still, those who can establish themselves as experts in this field will find that the payoffs are worth it.
M&A professionals have a significant amount of responsibility and handle many different tasks to ensure that the deal goes through smoothly. They often find themselves dealing with a large amount of stress since any mistake can cost their company millions of dollars. Despite this potential drawback, the pay is often relatively high since M&A professionals are highly valued by companies.
13. What Career Path Do You Think Is the Best Fit for Someone Interested in Pursuing a Career in Mergers and Acquisition?
Finance is an integral part of any M&A deal, so those who want to pursue this line of work should be sure they understand how finance works. Since many M&A deals are complex, those who wish to work in this field must have a detailed understanding of how numbers and assets translate into value.
The career path of a mergers and acquisitions (M&A) professional is an interesting one. It can be challenging but also very rewarding. If you’re thinking about pursuing a career in M&A, make sure you have the proper skill set and are comfortable with working long hours. With the proper training and experience, you could eventually become a senior executive in this field.