Mergers and acquisitions (M&A) are powerful tools for growing and strengthening a business. However, every M&A has its nuances, which is why it’s crucial for business leaders to create a well-crafted M&A strategy. With the right approach, this strategy provides a clear roadmap for success, helping companies navigate the complexities of M&A.
In 2024, M&A deals — like T-Mobile’s acquisition of US Cellular — dominated the headlines, and 2025 is already shaping up to be another big year for M&A. We predict that five types of M&A strategies will dominate the market. Learn what an M&A strategy is, why it’s so important, and the five types of M&A strategies trending in 2025.
In this article:
What Is an M&A Strategy?
A mergers and acquisitions strategy is a structured plan businesses follow to merge or acquire other companies. It’s a complex process that includes identifying potential deals, evaluating a company’s value, and executing the transaction.
The goal of M&A is to create synergy, or additional value, from the acquisition. Most M&A strategies create synergy by expanding into new markets, consolidating operations, or acquiring new technologies.
However, savvy business leaders don’t do M&A transactions blindly. Jumping in without a thought-out plan is a recipe for some of the biggest mergers and acquisitions failures.
An M&A strategy is essential because it helps companies make smart choices that maximize return on investment. It serves as a blueprint for every stage of M&A, from due diligence to integration.
5 Types of M&A Strategies for 2025
There are plenty of M&A strategies to choose from, but it’s key to unlock new M&A strategies tailored to current conditions. We predict these five types of M&A plans will reign supreme in 2025.
1. Vertical M&A
With vertical M&A, a company acquires another business in the same market or supply chain to increase efficiency and reduce costs. In a post-COVID market, this merger strategy improves supply chain resilience and gives companies more control over their operations.
A great example is ExxonMobil’s acquisition of Pioneer, which strengthened the company’s standing in the oil and gas industry.
2. Horizontal M&A
Horizontal M&A allows companies to expand into new markets or industries to increase market share and revenue. This merger strategy enables businesses to scale quickly, achieve economies of scale, and offer their customers a broader range of services or products.
If bitter rivals Coca-Cola and Pepsi merged, for instance, this would consolidate their market power and improve economies of scale.
3. Conglomerate M&A Strategy
A conglomerate mergers and acquisitions strategy diversifies a company by introducing it to new industries or markets. The goal of this merger strategy is to reduce dependence on a single market, which will be crucial going into the uncertain geopolitical environment of 2025.
For example, Amazon’s acquisition of MGM Studios was a conglomerate merger strategy that improved Amazon’s Prime Video content.
4. Market Extension Merger
A market extension merger happens when a company acquires another business operating in the same industry that offers a different product or service. This merger strategy allows the acquiring company to access new audiences, broaden its reach, and diversify revenue.
If a U.S.-based fast food chain acquired a European chain, for example, this market extension merger would extend the U.S. company’s market.
5. Product Extension Merger
This merger and acquisition strategy happens when a business acquires a company that offers a complementary product. The goal is to increase customer loyalty by adding more value to your product through the acquisition, offering customers a more comprehensive solution.
A product extension merger increases cross-selling opportunities, too. For example, a software company specializing in accounting tools does a product extension merger when it acquires a payroll software provider.
Frequently Asked Questions
What are the four types of merger strategies?
The four main types of M&A strategies are:
- Vertical mergers
- Horizontal mergers
- Conglomerate mergers
- Market or product extension mergers
What is the strategic planning of M&A?
Strategic planning for M&A involves creating a comprehensive mergers and acquisitions strategy that aligns with the company’s long-term goals. It includes identifying potential targets, conducting thorough due diligence, developing an integration plan, and ensuring cultural alignment to maximize value.
What is the three-stage model of M&A?
The three stages of M&A are:
- Pre-merger planning
At this stage, the businesses define their goals and identify potential targets for M&A.
- Deal execution
During the execution phase, the company negotiates with the target company and does a valuation.
- Post-merger integration
In the final step of a merger, the focus is on combining operations and finding synergies.
What are the three theories of mergers?
There are three theories of mergers:
- Synergy theory
With this focus, companies create value by combining forces.
- Agency theory
The agency theory looks at potential conflicts of interest between stakeholders in M&A.
- Market power theory
Market power helps businesses focus on reducing competition and increasing market share through strategic mergers and acquisitions.
Final Thoughts
In 2025, businesses are leveraging various M&A strategies to drive growth and adapt to an increasingly uncertain environment. From vertical M&A to product extension mergers, each approach offers unique opportunities for innovation and synergies.
As you evaluate potential M&A plans in 2025, choose the strategy that provides the best competitive advantage while reducing risk. You don’t have to do this alone, either. Discover how DealRoom can transform your mergers and acquisitions strategy with cutting-edge data, insights, and tools tailored to your needs. Request a demo now.
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