Glossary

What are Mergers & Acquisitions (M&A)?

Mergers & Acquisitions (M&A) refer to the merger or acquisition of companies. It is an umbrella term for transactions in which companies or parts of companies merge, split, or change ownership. M&A transactions can take place both nationally and internationally.

What do the main forms of M&A mean?

The term Mergers & Acquisitions describes two possible scenarios:

“Merger” means fusion, i.e., the merging or combining of two previously legally independent companies into a single economic and legal entity. Two (or more) existing companies are consolidated into one new entity.
“Acquisition” means takeover and describes the purchase or sale of a company or parts of a company. Here, one company acquires the majority of shares or assets of another.

Types of Mergers & Acquisitions: How do M&A differ?

Mergers & Acquisitions can be carried out in various ways. Two types of mergers are possible:

Merger through the creation of a new entity: A completely new company and legal entity are formed through the merger. The original companies are dissolved, and their assets are transferred to the newly created company.
Merger through absorption: The target company ceases to exist and is fully integrated into the acquiring company, including all its assets, liabilities, and debts.

Special types of M&A: How do M&A differ in execution?

In the corporate landscape, there are special forms of Mergers & Acquisitions that provide insight into the initial situation, execution, and outcomes of the merger or acquisition:

Leveraged Buyout (LBO): In this case, the purchase price is predominantly financed by external sources such as loans, often secured by the target company’s assets.
Joint Venture (corporate partnership): A collaboration between two or more companies is contractually agreed upon to jointly operate a specifically defined project or business area. For this purpose, a joint subsidiary is often established.
Takeover offer: Shareholders of a target company receive a public offer to purchase their shares. Depending on the management’s consent, a takeover offer can either be friendly or hostile.
Spin-off: A part of the business is split off and operates as an independent company. The shares are typically transferred to shareholders of the parent company.
Carve-out: A business unit is separated and either continues as an independent entity or is partially sold to investors, often as a preparation for a later sale or stock exchange listing.
Transfer of undertaking (business transfer): A company or part of a company is legally transferred to a new owner, with existing employment relationships being preserved.

M&A differentiation by trade levels

Additional M&A terms relate to the trade concepts of the respective companies. A distinction is made between horizontal, vertical, and conglomerate M&A integration:

Horizontal M&A: Refers to the merger of companies operating at the same production or trade level – hypothetical example: a merger between Coca-Cola and Pepsi.
Vertical M&A: Refers to the merger of companies operating at different production or trade levels – hypothetical example: a merger between Coca-Cola (as a manufacturer) and a food wholesaler (downstream distribution) or a raw material supplier (upstream supply).
Conglomerate M&A: Refers to the merger of companies with different business areas – hypothetical example: the acquisition of the U.S. organic supermarket chain Whole Foods by the online retailer Amazon.

M&A motives: Why do companies pursue Mergers & Acquisitions?

Mergers & Acquisitions are primarily driven by strategic decisions, often aimed at securing a company’s survival. Since a merger immediately increases the revenue, market share, and size of the resulting entity, M&A can deliver significant growth in a short period of time. Additional motives for M&A transactions include:

Strengthening market position
Promoting synergies
Entry into new markets

M&A process: What steps and phases are involved in execution?

Typically, M&A integration strategies involve the following five steps:

1

Identifying potential target companies or buyers
2

Conducting due diligence to assess the financial and legal situation
3

Negotiating transaction terms and drafting agreements
4

Executing the transaction, e.g., by transferring shares or assets
5

Post-Merger Integration (PMI) of the acquired company

These steps can be assigned to the following three M&A phases

Preparation phase

The goal of the preparation phase is to establish a solid foundation for decision-making and assess the compatibility and attractiveness of potential target companies. To realistically evaluate the risks and opportunities of a transaction, the following analyses should be conducted:

Market & Industry Analysis: Comprehensive industry and market information provide insights into the growth potential of the target company. For example, this helps determine whether a suitable market exists for the planned acquisition and whether industry trends can be advanced through the transaction.
Competitor Analysis: A thorough assessment of competitors delivers insights into the potential positioning of the merged entity compared to its rivals. Strengths, weaknesses, and unique selling points (USPs) of the potential target company are identified.
Due Diligence in M&A: Due diligence significantly contributes to determining the transaction value, incorporating comprehensive information about the target companies and buyers. This includes financial metrics such as assets, liabilities, and cash flows, legal and regulatory risks, as well as operational aspects like supply chains, IT systems, and corporate culture. In practice, specialized law firms, tax consultants and other M&A experts are used for due diligence in the M&A process.

M&A Transaction phase

The M&A transaction phase involves formulating the offer, conducting detailed negotiations, drafting the contract terms, and securing financing. A central element of this phase is the contract drafting process, typically involving the preparation of two key documents:

Term Sheet: Due to the complexity of negotiations, the main points are recorded in a discussion and working document before proceeding with the actual contract drafting. The term sheet already serves as a binding basis for the final agreements.
Letter of Intent: In addition, a letter of intent is prepared, in which the parties confirm their willingness to proceed with the negotiated transaction.

Subsequently, multiple contracts are finalized to establish the rights and obligations of the companies and individuals involved. The most important M&A agreements include:

Share Purchase Agreement: Defines the terms of the purchase and sale of shares in a company, such as the purchase price, warranties, and indemnities.
Asset Purchase Agreement: Specifies the conditions for the purchase and sale of a company’s assets, such as machinery, buildings, or patents.
Non-Disclosure Agreement (NDA): Ensures that confidential information shared between the parties is not disclosed to third parties.
Joint Venture Agreement: Outlines the terms of collaboration between companies, such as resource sharing or the joint development of new products.
Financing Agreement: Defines the terms of financing the M&A transaction, such as the loan amount or the involvement of investors.

The contract drafting process concludes with the signing of the agreements, followed by the mutual fulfillment of obligations (referred to as “closing”). The specific legal formalities required depend on the type of transaction.

Integration phase

The goal of any M&A integration strategy is the successful unification of the organizations, including their business units, processes, IT systems, and employees. In post-merger integration (PMI), the companies involved are brought together organizationally, procedurally and culturally. This requires careful strategic planning as well as structured change management. Synergies must be leveraged, redundancies eliminated, and a unified corporate culture established.

What are typical risks of M&A integration strategies?

The risks of M&A transactions primarily stem from financial, legal, operational, and public challenges:

How do companies ensure a successful M&A process?

Across all M&A phases, three key factors are critical to ensuring a smooth process and a successful transaction:

Reliable data foundation

Especially during the preparation phase, accurate and reliable data is essential for analyses and due diligence. A solid assessment of success requires comprehensive information about potential target companies, such as their finances, legal disputes, management teams, and industry trends. Research conducted solely on the open internet or from public media reports is inadequate and often error-prone. Economic and specialized knowledge databases provide security and high-quality data for this purpose.

Digital analysis tools

Research and analysis tools can make the preparation phase significantly more efficient by gathering information from various sources, automating analysis, and generating insights. AI technologies such as AI Agents and Multi-Agent Systems are increasingly critical for these tasks. During the integration phase, professional tools can be utilized to assess and monitor compliance risks effectively.

M&A consulting & expertise

Due to the complexity, diverse challenges, and risks of M&A transactions, the role of professional consultants is indispensable. Depending on the scope, experts can assist with analysis, negotiations, and contract drafting, as well as provide guidance on legal and financing issues, such as private equity (investment capital). Specialized service providers support companies across all phases – from due diligence in the M&A process to exit strategies in complex investment projects.

valantic has successfully driven over 550 M&A transactions and more than 700 projects in the areas of value creation, IT transformation, and post-merger integration. Learn more about valantic’s M&A and private equity consulting

Which M&A case studies and examples should companies know?

M&A transactions continuously shape and transform the global market and corporate landscape. There are numerous examples of successful mergers & acquisitions as well as news on planned M&A deals. Below are five recent M&A case studies:

1

Alphabet (Google) – Wiz (2025)

In March 2025, Alphabet (Google) announced the largest acquisition in its history: the purchase of the Israeli cybersecurity startup Wiz for approximately 32 billion USD. This move aims to strengthen Google’s cloud security offerings against Microsoft and Amazon. (Source: The Guardian)
2

Microsoft – Activision Blizzard (2023)

By acquiring Activision Blizzard for 69 billion USD, Microsoft secured a portfolio of successful franchises such as Call of Duty and World of Warcraft. This strategic acquisition was conducted as a “friendly takeover” and aimed to strengthen Microsoft’s position in the gaming and metaverse markets. (Source: Forbes, Microsoft Blog)
3

Twitter Inc – X (2022)

Elon Musk’s acquisition of Twitter in 2022 is a prime example of a “hostile acquisition,” where an individual or consortium fully buys and privatizes a publicly listed company. This case also highlights a leveraged buyout, as Musk financed much of the deal with loans and equity. After significant public scrutiny and lengthy negotiations, Musk acquired Twitter via a holding structure, using Tesla shares as collateral for 44 billion USD. He subsequently assumed the CEO role (ownership change) and rebranded the company as “X.” (Source: Reuters; Bloomberg)
4

Bayer – Monsanto (2018)

After two years of negotiations with the U.S. company Monsanto, Bayer finalized the acquisition deal for approximately 66 billion USD – the largest foreign acquisition by a German company at the time. The deal was intended to make Bayer the global leader in agricultural chemistry but faced criticism from the outset due to Monsanto’s controversial reputation and ongoing lawsuits related to its glyphosate-based weed killer. (Source: Bayer, Process Vogel)
5

Mannesmann – Vodafone (2000)

The acquisition of Mannesmann by Vodafone in 2000 was, at 180 billion USD, the largest hostile takeover in corporate history at the time. For Vodafone, the deal provided strategic access to the lucrative European market and strengthened its position as the world’s largest telecom company. However, the purchase of the German mobile provider initially met with significant political and public resistance. (Source: Handelsblatt, Goldman Sachs)

M&A trends 2025: How is the market for M&A deals evolving?

The future trajectory of the M&A market depends heavily on factors such as international monetary policy, regulations, and geopolitical developments. The following M&A trends are currently emerging:

1

Strategic focus on growth & digital transformation

The motives for M&A transactions are increasingly centered around acquiring digital and AI capabilities, strengthening technological infrastructure, transforming business models, and entering new markets. Investments in AI, cloud, and digitalization are driving many M&A deals – primarily in the tech sector but also increasingly in other industries.
2

Mega-deals remain stable, mid-market recovers

Large transactions (over $1 billion) are gaining importance, even as overall transaction volume slightly declines. M&A activity within the mid-market is rising, fueled by more favorable financing conditions.
3

Sectoral differentiation

The dominant and most active industries for M&A deals currently include tech and AI, industrial and construction sectors, healthcare, renewable energy, financial services, and cybersecurity.

A decline in interest rates could reinvigorate the M&A market, provided financing costs remain moderate. However, geopolitical uncertainties, protectionism, and regulatory interventions remain key challenges. (Sources: PwC, KPMG)