Deal Newsletter

4 M&A strategies

A quick search on the net throws up many reasons for M&A (Horizontal/Vertical) including bringing economies of scale, operational efficiencies, tax benefits. While being a marketing model, We find the Ansoff’s matrix be a good guiding beacon on when may one explore taking the inorganic route:
1.  Market penetration strategy – Buying out competition in ones existing market. This gives an opportunity to gain a larger market share via consolidation. One could do this via organic route too but that entails a deep pocket for getting customers attention (marketing muscle). Will the buyer keep the brand being bought out (yes if it has a strong national/regional presence) or kill it (what Ola did to Taxi for Sure to eliminate competition) as it may only want the customer base (loyalty would surely be known beforehand). Getting control of target’s supply chain could also be a potential reason.
2.  Product development/extension strategy – offering complementary products (to your current ones) to your existing set of customers. Increases wallet share per customer. Makes immense sense as one doesn’t have to cannibalise either of the products. Tyring to do this the organic way would take considerable time and money for product R&D and market penetration. E.g Pepsi’s acquisition of Pizzahut.
3.  Market development strategy – venturing into geographical expansion to sell existing product in new markets. Wisdom says one should do this after it has