Pricing in Mergers & Acquisitions

Pricing and M&A

When a company decides to acquire or merge with another company several pricing-related points must be addressed, both pre- and post-acquisition/merger.

Before an acquisition or merger, it is important to analyze the pricing power of the target, and hereunder, what potential there is. Pricing is the most important profit-lever for a business, and the degree to which there is scope for improvement has a significant effect on the company valuation. A thorough analysis of the willingness to pay for the target’s product or service is therefore crucial.

After an acquisition or merger has taken place it is time to benefit from the synergies. With a horizontal acquisition, it must be decided whether to charge the acquirer or the acquiree’s prices and which company brand has the highest pricing power. With vertical acquisitions, it is necessary to determine whether the acquirer’s brand can be leveraged for charging higher prices, and if so, what should that higher price be?