The AOL-Huffington Post Deal has generated hundreds of expert views on the matter. Mergers and acquisitions (M&A) transactions, in general, show mixed results.
Despite making sense on an Excel spreadsheet, many M&A transactions are plagued by problems: systems integration issues, differences in cultural communications, lack of post-merger direction, and a failure by management to articulate the benefits to the market cause the downfall of many transactions.
According to Thomson Reuters, the value of M&A transactions globally surpassed $2.4 trillion last year, an increase of 23 percent over 2009. Clearly business owners, managers and their financial advisors aren’t swayed by the risks.
So does this deal make sense? Answering that question is important for small business owners because:
1. M&A activity among small businesses is common. Analyzing prominent deals can provide valuable insight into determining whether or not a deal is sound.
2. Small businesses are often the target of acquisition by larger companies. Understanding the mindset of potential suitors can help you position your company for an eventual acquisition.
Framework for analysis
A good framework for analyzing an M&A transaction asks four questions:
1. Does it make sense strategically?
2. Does it make sense financially?
3. Does it make sense operationally?
4. Does it pass the smell test?
Let’s answer these questions for the AOL–Huffington Post deal, keeping in mind that these principles can apply towards your company as well.
Want more tips on mergers and acquisition? Check these stories out:
Does it make sense strategically?
Yes. According to AOL’s CEO Tim Armstrong, the company’s current turnaround strategy relies in large part on their 80:80:80 focus. Discussed in the memo he sent out announcing the merger, the trio of 80s come from the fact that “80 percent of domestic spending is driven by women, 80 percent of commerce happens locally, and 80 percent of considered purchases are driven by influencers.” Operating from this basis, The Huffington Post provides a high profile method to expand AOL’s reach in at least two of these areas, women and influencers.
For The Huffington Post, AOL provides resources to continue execution of its expansion strategy into local and global content. It also offers the chance to expand its core audience and reach as many as several hundred million additional users. It will be important, though, for the company to balance the needs of its new corporate parent with those of its loyal user base which is a core part of its success.
Go to the article: Does the AOL-Huffington Post Deal Make Sense?
