Corporate development strategies
b]#1 Mergers and Acquisitions
Large companies often acquire/buy out smaller firms that have skills, knowledge, customers, revenue, earnings, and/or cash flow that can significantly benefit the acquiring company. In other cases, a company may acquire a firm that it thinks has potential and then revamp its business model to take it in a new, and hopefully, profitable direction. To carry out such acquisitions, corporate development professionals need to be skilled at corporate valuation, risk management, financial modeling, negotiation, and integration.
When carrying out mergers and acquisitions, corporate development teams: (1) create a target list, (2) value the companies in a financial model, (3) negotiate terms of the deal, and (4) integrate the acquisition into the company. For more on this, please see our guide on the M&A Process.
For successful integrations, Corp Dev teams often create a Transition Services Agreement (TSA) between the buyer and the seller. A TSA specifies the nature of and duration for which the seller will continue to provide services to the business which has been purchased. This creates value for the buyer as it provides them with time to integrate the newly purchased business. It also helps the seller as it allows them to mitigate stranded costs and restructure their systems (especially if only a part of their business has been acquired by the buyer).
#2 Long-term Partnerships
Having a reputation in the marketplace as a “partner” of choice provides a company with a competitive advantage. This is because stable partnerships, comprised of a number of organizations, provide all the partners with economies of scale. Furthermore, in order to avoid a price war/a race to the bottom with a potential competitor, companies often prefer establishing partnerships with them.
Also, forming partnerships is (usually) much less capital intensive than acquiring a firm. Thus, given the demand for establishing partnerships in innovative ways, knowing how to establish sustainable partnerships with other organizations creates a competitive advantage.
( Armistice is Coretecs Hedge fund institutional investor who provided the 6 million dollars to fund Coretecs plans to commercialize a product )
#6 Creative Transactions for Optimizing Shareholder Value.
Activist shareholders and hedge funds often exert external pressure on a company by stating their preferences and views regarding the company’s performance and strategic direction. The demands put forth by such investors act as incentives for the corporate development team to engineer new kinds of deals for optimizing shareholder value.
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