INTRODUCTION
There is a certain thrill associated with working in the Mergers and Acquisitions (“M&A”) field. Companies are bought, sold, divided, restructured, and combined by corporate strategists to enhance growth and efficiency. Analysing financial statements, studying company operations, and determining how a company will fit within another company or a larger portfolio are some of the ways mergers and acquisitions analysts support these complex deals.
This article stresses on why you should choose M&A as your career. Along with the reasons to choose M&A as your profession, it is important to discuss why do companies engage in M&A activities and what constitutes M&A as a career.
WHY DO COMPANIES ENGAGE IN M&A?
Several conglomerates merge or acquire other companies due to the following reasons:
- Growth: Growth through acquisitions is a common method of leapfrogging rival companies. Organic growth, on the other hand, can take years or decades to double the size of a company.
- Synergies: Through leveraging of each other’s strengths, overall performance efficiency increases and costs are reduced across the board when the two companies combine their efforts.
- Elimination of Competition: M&A activity generally takes place in distinct cycles, and it is due to this powerful motivation. In most mergers and acquisitions, the acquirer gains a larger market share by eliminating future or existing competition.
- Tax benefits: Companies use M&A to reduce their corporate tax liabilities, although this is often an implicit rather than an explicit factor.
M&A AS A CAREER
Working in the M&A field is like working in a highly visible position within an extremely rewarding and intellectually challenging environment. M&A analysts who execute successful deals become highly sought after individuals within the company. In addition to finding jobs with investment banks, M&A analysts can also find work within corporate sectors.
The following are the key players involved:
- Corporate business development professionals are role players in the M&A process within a corporation, serving as in-house mergers and acquisitions champions within a large corporation.
- In addition to the Chief Executive Officer, the Chief Financial Officer, and the Chief Operating Officer are key members of the senior management team. Professionals involved in transaction-related roles, such as lawyers, risk managers, and accountants, assist in guiding deals toward success.
- Investment banks may act as intermediaries in M&A deals, acting as consultants to the companies involved in the deal. Their services can cover both the buy-side and the sell-side of a proposed acquisition deal, as well as helping with financing the proposed deal.
As part of their responsibilities, M&A professionals play a variety of roles before, during, and after deals close. An individual interested in an entry-level career in this field should possess strong strategic, financial, and interpersonal skills. The following are the duties of an M&A professional:
- Proper identification and communication of potential targets.
- Due diligence of the proposed transaction.
- Valuation and deal structuring.
- Pre-merger and post-merger integration.
WHY M&A?
It is no surprise that many of the world’s largest companies, as well as many smaller ones, have flourished due to the benefits of M&A.
As a general rule, M&A is an excellent field for individuals who are more technically oriented. If you are passionate about a particular industry, M&A is not right for you. M&A gives you no exposure to equity or debt markets in particular.
The question, however, arises is why should one choose to pursue M&A as his / her career?
The following are the reasons as to why you should choose M&A as your career:
- Unlike other careers, M&A can put you in a unique position at the intersection of finance and strategy. Along with enforcing several strategies, an M&A professional has to apply his financial knowledge and core skills related to the field. This allows one to gain exposure in the financial field and strategic development.
- From an entry-level only, an associate in a law firm or in-house counsel or any other related professional in the M&A field is exposed to a level of seniority and industry expertise. For instance, an associate will be involved in drafting several complex documents, conducting due diligence of the proposed M&A transaction, communicating with high-net-worth clients in the absence of a senior associate/partner.
- In addition, when executed well, M&A deals can be highly lucrative, particularly when it comes to advisory services. M&A deals are rarely carried out by large and small corporations on their own; instead, people like consultants or intermediaries are hired. Therefore, if you are backed up with strong advisory skills in the field of general corporate and M&A, you are likely to be at a huge advantage from a professional standpoint.
- Often, tax benefits can be obtained if an acquisition is made by a strategic company or in a country with a favourable tax regime. In such a case, if you are equipped with good knowledge of taxation law or have done masters in the taxation field or have an immense amount of experience practising as a lawyer in the taxation field, you will be either hired or promoted to senior-level positions in exchange for your services.
- According to this report (see here), M&A is one of the highest-paying professions. For example, a typical M&A banker in London earns $350k ($453k), which corresponds roughly to what the third-year vice president (VP3) typically makes in London. Typically, in a big law firm in India with Tier-1 status, an M&A lawyer earns an average of 90 lakhs to 1.2 Crore INR per year (at the partnership level). Of course, there are some of the most influential players in M&A, who can take home up to 20 times as much. In some cases, the partners at a Tier 2 firm earn more than 16 times the salary of the team under him. It is indeed a lucrative field in terms of remuneration. According to their experience and knowledge, lawyers get handsomely compensated.
- Unlike equity or more standardized debt deals, each M&A transaction is unique. Hence, it is possible to view cases of different types of transactions from different perspectives (strategic vs. financial sponsors, buyer vs. seller, company agreement vs. asset agreement, hostile vs. friendly approach, etc.).
- M&A deals usually involve dealing with the CEO/Board of Directors and witnessing intense negotiations between counterparties as well as exposure to a lot of egos. Therefore, you learn about the negotiation process, managing egos, bringing the acquirer/buyer and the acquiree/seller at mutually agreed terms, etc.
- Being a corporate lawyer or an investment banker, who is dealing in M&A transactions, has always been considered as an elite profession that comes with prestige and leadership trajectory. In addition, learning is a huge part of corporate law. Not to mention, your personality and communication are augmented when you represent a client or organization.
CONCLUSION
The bottom line is besides the massive scope of income, the M&A field is thoroughly intriguing, challenging and has the potential to take your professional life to the next level. Check out our other posts on Mergers and Acquisitions to know more!
YLCC would like to thank Nikunj Arora for his valuable inputs in this article.
