Hardware Industry M&A Synergy Capture

Mergers and acquisitions (M&A) have become a valuable tool to achieve growth in the hardware industry, especially for companies looking to acquire a new product line, expand into new markets, or diversify their portfolio.

Despite opportunities for expansion and lateral growth across regions, hardware industry M&As are a growth strategy and therefore require deep assessment of the potential of each M&A synergy capture, to ensure that all costs and risks associated with the transaction are taken into account. But not all M&A synergies are created equal. Some are more difficult to capture than others, while a few may not even be worth the effort. It therefore becomes critical to evaluate the potential M&A before deciding to move ahead with the deal.

Evaluation of M&A Synergies in the Hardware Industry

The hardware industry’s M&A synergies are always a complex process, as it involves assessing the potential cost savings and revenue increases from the wafer-think margins that can be achieved by merging two companies.

There are, however, some commonalities that the hardware industry shares with other verticals. So, the following factors might come in handy while assessing a deal.

Scope of the Transaction

As mentioned earlier that profit margins are wafer thin, larger the transaction, greater the potential for revenue increases, not to mention the impact that the M&A will have on the company’s operations and its ability to compete in the market.

Financial Performance

The target company must be evaluated for its financial performance to understand if there are any potential cost savings post the transaction.

Competitor Landscape

This is often the first consideration that a company makes prior to finalizing an M&A due to the obvious strategic importance.

Regulatory Environment

Legislations come up every now and often vary from country to country. It’s therefore conduct proper research to understand the potential implications of the transaction from the perspective of the regulatory environment.

Bringing Science to the Hardware Industry M&A Synergy Capture

Evaluation of M&A synergies in the hardware industry has been a complex process, especially due to supply chain volatility in recent time. But M&A synergy capture frameworks can help organizations evaluate the potential for M&A synergies and identify the most effective ways to capture them, by using a combination of quantitative and qualitative techniques.

Use of such frameworks to help organizations to understand the competitive landscape better. At the same time, organizations can identify the risks and the implications of the M&A, so that they can take an informed decision.

Implications for Hardware Industry M&A Synergy Capture

The hardware industry has been traditionally a technology-driven domain — to create the base for newer technologies that impact each and every sector globally. Innovative products and services keep on evolving the industry, and companies keep on investing in R&D on a continual basis to gain access to the latest cutting-edge technology and products, as well as to expand their product lineup.

Evaluating M&A synergies is critical for organizations so that they can take the necessary steps required to capture the maximum number of synergies possible. By using the suitable M&A synergy capture framework, organizations can gain greater clarity and insight into their potential M&A synergies, enabling them to make more informed decisions.

Best Practices for Hardware Industry M&A Synergy Capture

Hardware companies typically look to identify and capture value through operational efficiencies by streamlining operations, increasing automation, and leveraging existing infrastructure. Companies can also look to identify and capture value through leveraging existing talent and capabilities, such as research and development, marketing and sales, and manufacturing.

To put it in simple words, hardware manufacturing companies looking to maximize their M&A synergy capture look at the following best practices:

• Evaluate the potential cost savings and revenue growth
• Evaluate the potential associated risks and pitfalls
• Evaluate the potential implications of the transaction from a regulatory standpoint
• Use suitable M&A synergy capture frameworks for clarity and insights
• Monitor the performance of the combined entities post-transaction
• Develop a comprehensive strategy for capturing the synergies

Conclusion

Mergers and acquisitions are important tools that organizations can adopt to maximize growth in the hardware industry. However, it’s important to remember that not all M&A synergies are created equal. Organizations should take the time to evaluate the potential M&A synergies and ensure that they are taking the necessary steps to maximize their synergy capture. Evaluating the potential M&A synergies and using frameworks to gain greater clarity and insight into potential M&A synergies, organizations can ensure that they are making the most of their M&A transactions.