• Growth via Merger-Darwin at Work- MergerCircle

  • Robin Trehan, B.A, MIB, MBA electronic business

    There has been always a dilemma how to grow after a certain point. The option, of whether to grow organically or by mergers and acquisitions are two ways to go. The desire for a rapid and sustainable growth organically has been slow process and it has led the way to the second option of mergers and acquisitions across the board.

    A rapid growth through merger and acquisitions is the mantra for today. Taking something that is already established and growing it by trimming it, restricting it and removing dead weight is the way to go in the fast emerging global market. In this process the asset acquired is most of the time undervalued and the acquirer brings in a team of people who have the right skills and grow the assets which have potential and liquidate the ones which are not adding value or not in alignment with the restructuring process.

    The combination of capital; whether private or public, asset quality, management, earning potential, liquidity of the assets and sensitivity to market both internal and external play an important role in the process of M&A. Darwin’s theory of survival of the fittest is the best way to define it. Either kill and grow or get killed.

    The ability to grow fast is a tricky question and what to acquire and when to stop is something to be analyzed in M&A process. The scale of the deal in terms of size, its price; what to pay can put pressure on the existing infrastructure to work efficiently. This is a difficult game. The best way to analyze is to take a cube and double the surface area, and we will simultaneously be quadrupling the volume. How to bring in the same growth rate and bring in the right talent becomes a questions.

    As said, it is Darwin’s theory which is at work. The better will win and weaker will have to make space for better. It is a constant flux situation, the only thing which will shape it will be the shareholders return and burning desire to grow at speed of light.