March 19, 2015

Mergers can expose products to broader audiences

For many mergers and acquisitions, a primary goal is to broaden the exposure of certain products and services. This can be an objective on the part of a buying company or an acquired company. For example, we recently discussed LinkedIn's purchase of Careerify, a platform that uses data to help companies recruit employees. On its own, the small Canadian firm might not have possessed the resources to expand at the rate it would have desired, so a purchase by social giant LinkedIn should rapidly accelerate that growth. 

As LinkedIn incorporates aspects of Careerify's service model into its social platform, more users will be exposed to those functionalities. McKinsey and Company, a management consulting firm, uses an example from the pharmaceutical industry to explain how those goals are achieved through strategic mergers and acquisitions. 

"Small pharmaceutical companies, for example, typically lack the large sales forces required to cultivate relationships with the many doctors they need to promote their products," explains the company blog. "Bigger pharmaceutical companies sometimes purchase these smaller companies and use their own large-scale sales forces to accelerate the sales of the smaller companies' products."

Whether the buying company has a large physical distribution presence or a visible profile on the internet, smaller companies can benefit. Conversely, a large company with a range of products or services might purchase a smaller firm with greater capability to promote existing products. This is why many tech companies seek acquisitions of video advertising or web-based marketing firms, as they possess the expertise to heighten brand awareness and broaden social reach. 

With the guidance of an M&A advisor, your company can determine which acquisition strategy is most effective for the future.