Nowadays, M&A (Mergers and Acquisitions) is a very common process among large technology companies, but what does it mean in practice?
The term M&A, or Mergers and Acquisitions, describes the consolidation of companies that combine in some way through various types of financial transactions, including mergers, consolidations, acquisitions, and asset purchases, among others.
Although "Mergers and Acquisitions" is used interchangeably, legally Mergers and Acquisitions have different meanings.
In a merger, two companies of the same size combine to become a single entity. In
an acquisition, a larger company acquires another, and so absorbing its business.
The technology market is currently at one of its highest points. Companies are
investing heavily in digital transformation as a result, attracting other companies
from the most diverse segments into this market.
It is very important to emphasize that the process of Mergers and Acquisitions (M&A) can happen for several reasons and purposes, among them are:
Reduce costs and increase revenue through cost synergies
Diversify cash flowsand reduce market risks
Search for tax benefits
Increase your market share and gain power to influence prices
Surviving or protecting oneself, as an example the merger of banks during the 2008 crisis
> Vertical: Ver tical merger happens between a company and its customer/supplier that is part of its supply chain. In this type of merger, the company wants to move up or down its chain in order to consolidate its position in the industry.
> Horizontal: This type of merger occurs between two companies in similar industries that may or may not be competitors.
> Conglomerate: This merger is done for diversification, so it occurs between companies in unrelated sectors.
> Complementary: carried out between companies that commercialize complementary products or services.
> Extension: acquisition or merger between companies that market the same products and services, but to different audiences.
> Subsidiary: In this merger, the target becomes a subsidiary of its acquirer, but keeps its business.
> Statutory: This type of merger usually occurs when the acquirer is much larger than its target and acquires its assets and liabilities. After the deal, the target company ceases to exist separately.
> Consolidation: In consolidation, both companies participating in the transaction cease to exist and a completely new entity is formed.
In addition to the types of operation and forms of integration, there are two basic ways of doing procurement:
> Stock Purchase: The acquirer pays cash and/or stock to the shareholders of the target company for the shares in that company. In this way, the shareholders receive remuneration and not the target. In this format, the acquirer absorbs all assets and liabilities of the target, even those that are not on the balance sheet.
> Asset purchase: In asset purchase, the acquirer buys the target's assets and pays the target directly, and no shareholder approval is required.
An example of M&A took place last July 29thin which levva, a digital transformation organization with large clients such as Grupo NC, EMS, AmBev, Azul Linhas Aéreas, GrendeneTicket, WEG and West Rock, announced the acquisition of Advice, a consulting firm specializing in digital transformation. e-commerce. This acquisition is part of levva's major expansion within the technology market segment, creating its own innovation ecosystem.
A Advice was founded in 2016 and, at only three months old, was invited to partner with Digital Results (RD Station), one of the largest marketing and sales portals in Latin America. In all, the business accumulates nominations and awards in events, such as RD SUMMIT, VTEX Day and ABcomm, being among the best performance companies in the country.
The acceleration of digitalization of numerous retail businesses, a consequence of the COVID-19 pandemic, has resulted in the expansion of e-commerce services. With this, levva identified in Advice a great potential to expand its portfolio of solutions. According to Cadu Biaseto, CDO at levva, "The major goal of the acquisition is to improve the customer experience and bring greater efficiency to digital solutions."
Large organizations have had difficulty in finding partners that can help them in the end-to-end management of their e-commerce. Advice has this expertise, being a specialist in strategy and market intelligence, and will act in issues related to all aspects of e-commerce, such as performance, end-to-end management, product management, and development of B2B and B2C platforms.
The M&A promises to be advantageous for both organizations. According to Jairo Soares, CEO of Advice, the main objective is to better explore the technology market segment. Thus, Advice becomes a MartechThus, Advice becomes a company that joins marketing and technology in its scope of work. For André Milanez, CEO of levva, levva's constant expansion movements, over the last few months, can be summarized in a single sentence: "Staying where we are is no longer an option for our business."
"The purpose of the M&A with Advice is to further strengthen e-commerce consulting within the ecosystem, which will result in a major impact on our clients' business objectives."
Jessé FreitasCOO of levva
Levva is constantly expanding and saw in the M&A process an opportunity to expand its business, transforming what was just a company into an ecosystem that generates opportunities and innovations.
There are other factors that help a company grow. Have you thought about the role that design can play in your business? You can check our article on what your company gains by investing in design.
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