For many organizations, business success is largely dependent on growth and expansion into the future. These businesses often look to mergers and acquisitions as a way to broaden their scope and solidify the organization’s future. These transactions, however, all come with risks and it is critical that a company performs its due diligence to uncover any potential hazards.
Unfortunately, changing business trends often alter the way a risk analysis is completed. While continuing to examine certain elements of the business transaction, an organization must also adopt a new perspective when determining what risk factors might exist. Three recent trends in mergers and acquisitions could force a company to re-examine risk analysis, including:
- Untangling assets: As a mature business sells off pieces of the organization, the company that acquires these pieces must often disentangle historic elements of the business segment. From business processes to entrenched culture, the new business might not line up perfectly with the buyer’s organization.
- International transactions: While no business transaction can be said to be easy, those involving cross-border elements have additional factors of complexity. Due to the global reach and potential expansion of today’s organization, it is not uncommon for a business to seek mergers and acquisitions in other countries. Legal constraints, cultural differences and supply-chain logistics all work differently in an international transaction.
- Changing expectations: Historically, organizations used mergers and acquisitions to deliver cost reductions to the existing business. A recent trend, however, sees these expectations shifting toward providing increased growth potential.
As trends continue to evolve, risk analysis could be impacted. A business might historically focus on certain attributes of the target organization that could be risky. Those criteria might change, however, as the goal of the merger or acquisition shifts.