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We explore key factors in choosing M&A targets—strategy, industry, and financial risks.
The selection of target companies in M&A is the starting point of a successful transaction.
It is not just a simple financial judgment but a key process to achieve the company's strategic objectives and secure long-term performance.
This column will focus on the main elements of selecting M&A target companies: strategic goal setting, industry analysis, and financial status and risk analysis.
The Importance of Strategic Goal Setting
The most important starting point for a company pursuing M&A is setting clear strategic goals.
The requirements for suitable target companies can vary according to various objectives such as entry into new markets, business diversification, strengthening technological capabilities, and securing competitive advantages.
For example, if cost reduction is the goal, a company that can control part of the supply chain could be targeted.
It is important to clearly define target companies that align with the corporate objectives.
The Importance of Industry Analysis
Industry analysis is an essential process in evaluating the potential of target companies.
By comprehensively analyzing the growth potential, competitive structure, and regulatory environment of the industry, you can identify which industry best aligns with the company’s strategic goals.
It is particularly important to closely observe the movements of major competitors in the industry and accurately capture opportunities in the market.
Generally, it may be more attractive to seek acquisition opportunities in industries with high growth potential rather than in mature or declining phases.
Financial Status and Risk Analysis
The financial condition of the target company plays a crucial role in evaluating stability and profitability.
By thoroughly reviewing financial statements, profitability, debt ratios, and cash flow, financial stability can be secured.
Additionally, companies with excessive debt or inefficient financial structures may pose future risks, so it is necessary to identify these in advance and adjust the transaction structure.
To maximize post-acquisition financial performance, a proper valuation of the target company should be conducted.
Conclusion
The selection of M&A target companies is a process that goes beyond simple financial judgment to comprehensively consider various factors such as strategic goals, industry analysis, and financial stability.
WMD is composed of a team of M&A experts from major accounting firms and law firms such as Samjong KPMG and Kim & Chang, Law Firm Sejong LLC, who utilize a self-developed AI system to quickly and accurately analyze target companies that align with the client’s strategic objectives.
We accurately evaluate the value of target companies through AI and big data and support successful M&A with client-tailored solutions.
Thank you.