News & Events

Mergers and Acquisitions as a Means to Grow and as a Goal of Growth

15/10/2021

LEXR is expanding by creating a center of excellence for mergers and acquisitions (so-called “M&A”) transactions. As you know, we have the ambition to be the Swiss tech companies’ preferred legal partner for smooth, sustainable, and successful growth.

In this article, we wish to show you the value that our M&A expertise can give you. To do so, we’ll address: (i) what, exactly, M&A transactions are, (ii) how such transactions could be a great tool to scale your business and (iii) how an M&A transaction is, or at the very least should be, every founder’s goal in creating and growing their business venture.

What are “M&A” Transactions?

The term “M&A” gets thrown around a lot and is given various definitions. In a nutshell, M&A includes various types of transactions in which the ownership of a company, business unit, or asset(s) is transferred to or consolidated with other entities. There are various ways to structure such transactions, including mergers, demergers, acquisitions of shares or assets, joint ventures, carve-outs, and many more.

For various reasons, which we would be happy to discuss more in-depth with you, the vast majority of M&A transactions in Switzerland take the shape of share deals. This means that the core of the transaction entails transferring shares of the company that exploits the desired business or owns the relevant assets.

M&A is a Means to Grow

Once your business has grown organically to the point that it has generated sufficient excess liquidities, an interesting strategic initiative to kick-start a solid new growth spurt is to proceed to an M&A transaction. Indeed, by purchasing a business specifically targeted to complement yours, you can instantly enter a new market (geographical or otherwise) or grow your existing market footprint, thus creating strong synergies and therefore optimizing the use of your resources.

On the other hand, even business units that you feel are performing less than the rest of your company could be attractive targets for other players. Letting go of these business units is an interesting way to free liquidities to be allocated elsewhere. Such liquidities could then be injected directly into a more growth-prone part of your venture or used to purchase another business unit or asset that you believe can better be leveraged towards sustainable growth.

Finally, joint ventures, i.e. the alliance of two separate players for one specific business venture, are a great way to expand in markets that you would not have been able to enter alone without losing control or ownership of your own business.

M&A is the Final Goal of Growth

As the proverb goes, “there’s always a bigger fish”… In this instance, the point is to say that there could always be a more prominent player than your company, willing to purchase your entire business.

Concretely, upon initiating a business (be it a lean tech startup or any other business), founders would be well advised to conceptualize where they see their venture going in the long term. For example, do they see themselves as “serial entrepreneurs,” whereby they will start the next great thing after exiting their current venture or is this the adventure of their lifetime, which they foresee as a part of a legacy to be passed on to their children at the end of their careers?

Either way, all businesses will – sooner or later – face the will of their founders to exit. From the business’ perspective, this fatality is actually a great thing and should be thoroughly planned for since its inception.

The same thought process leads great chess players to decide and plan for their preferred endgame before they even move their first pawn. For example, if you want a closed middlegame, you don’t play the same opening as if you want to burst the game wide open. This metaphor applies or should apply, quite directly to any business venture.

The growth of a company (be it organic growth, equity financing transactions, etc.) should therefore always be thought out while keeping in mind its leaders’ preferred middlegame (i.e. the ways and extent that they foresee the company’s growth), as well as their end-game (i.e. the proximity and form of exit).

Conclusion

By creating an M&A center of excellence, LEXR wishes to be in a position to even better advise business leaders from a legal perspective throughout their entrepreneurial voyage, all the way to their exit.

We look forward to discussing this exciting topic with you and will be happy to accompany you for your M&A transactions, both buy-side or sell-side.

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