M&A strategy: Types, examples and how it creates value

Any seasoned business owner knows that developing and executing strategy is a critical aspect of driving corporate value. Here we take a look at the benefits of a mergers and acquisitions strategy.

Being part of a business without strategy is like being in a ship without a sail – the business may stay afloat but there is no impetus driving the operation to a desired destination. This will lead to stagnation, and incremental value creation is rare when this is the case. Fortunately, there are many different types of strategy that can be implemented in a business, from marketing to development to operations to financial. All of these are generally adopted with the same objective in mind – to enhance value for stakeholders.

What is an M&A strategy?

An M&A strategy is a clear plan for how a business will use mergers or acquisitions to achieve its wider goals. This could include entering new markets, expanding its services, increasing scale and strengthening its competitive position.

Why is an M&A strategy important?

An M&A strategy is important because it gives business owners and leadership teams a clear framework for identifying, assessing and executing opportunities that can create value. When approached properly, it can help a business grow faster, strengthen its market position and build a more attractive platform for the future.

• Faster growth than organic expansion: Acquiring or merging with another business can deliver immediate scale, rather than relying on organic growth, which can be slower.
• Access to customers, contracts, capabilities or geographies: M&A can help a business enter new markets, broaden its services or gain access to relationships and expertise that would take years to build internally.
• Economies of scale: A larger combined business may be able to operate more efficiently by reducing duplicated costs and accessing economies of scale, improving margins across the group.
• Multiple arbitrage: Larger, more diversified businesses are often seen as lower risk and can therefore attract higher valuation multiples. This can create an immediate uplift in value when the combined business is valued at a stronger multiple than the acquisition price paid. This is particularly important where the end goal is an exit.
• Stronger exit positioning: A well-executed M&A strategy can make a business more attractive to future buyers by increasing scale, broadening its offering and demonstrating a clear track record of growth.

An illustrative example

Often, the best way to illustrate the value of a M&A strategy is through a hypothetical example. Imagine that two similar companies exist:

• Company A – deriving EBITDA of £5 million annually.
• Company B – also deriving EBITDA of £5 million annually.

Both businesses have a valuation multiple of 8x, meaning that the value of each separately is £40 million. Now imagine that the following happens:

1. Company A acquires Company B for £40 million, and they have combined earnings of £10 million.
2. The valuation multiple for the combined operation is now 10x EBITDA.
3. Company A spends the next year integrating Company B into their operating model. As a result, synergies of £2 million are generated, meaning that EBITDA of the combined operation is now £12 million.

As soon at Company B is acquired, the combined operation is in theory worth £100 million (£10 million x 10) i.e. £40 million has been paid and £60 million of value has been received. £20 million has been generated through multiple arbitrage. One year post-acquisition, the operation is now worth £120 million (£12 million x 10). This single acquisition has now created £40 million of incremental value for the shareholders of Company A in one year, a return of 100%. Now imagine that this process is executed a number of times, and you should begin to understand the significant value that is possible through a M&A strategy.

Types of M&A strategies

There are several ways to structure an M&A strategy. The right approach will depend on what the business is trying to achieve, whether that is scale, access to new markets, control over the supply chain, diversification or a stronger exit position. The illustrative example above is a simple version of a scale-led acquisition, where Company A acquires a similar business, increases EBITDA and benefits from a higher valuation multiple.

Common types of M&A strategies and their objectives

How to choose the right M&A strategy

Choosing the right M&A strategy starts with being clear on the outcome the business is trying to achieve. A transaction should not be pursued simply because an opportunity is available, rather it should support the wider corporate strategy and have a clear value creation plan from the outset.

• Define the strategic objective: Decide whether the priority is growth, market entry, capability, efficiency, diversification or exit value.
• Identify the source of value: Be clear on whether value will come from multiple arbitrage, cost savings, revenue synergies, stronger market positioning or a combination of these.
• Assess the capital requirement: Consider how the transaction will be funded and whether the expected return justifies the risk and investment.
• Understand integration requirements: The more complex the integration, the more important it is to have a realistic plan for people, systems, operations and culture.
• Consider timing and readiness: A business should have the management capacity, financial discipline and operational foundations to execute the strategy properly.
• Test the exit impact: Consider how the acquisition would affect the future saleability, valuation and attractiveness of the business to potential buyers.

Company A’s acquisition of Company B works because the strategic rationale is clear. The deal creates immediate scale, supports a higher valuation multiple and provides scope to increase EBITDA through synergies. The strongest M&A strategies are those where the buyer can clearly explain why the target is the right fit, where value will come from and how it will be realised after completion.

Final words

Here at Gerald Edelman, we are very excited by the prospect of businesses implementing M&A strategies. Each M&A process is exciting, risky, intense, and often unpredictable. Our Deal Advisory team has strong experience in navigating through such processes, and would be more than happy to discuss strategy, whether involving M&A or not, with you or any business stakeholders that you think could benefit from a no-obligation discussion.

If you are thinking of selling your business in the coming years, we’d also be delighted to discuss what this might look like and how buyers would benefit from acquiring you!

Last reviewed by our Corporate Finance team: August 2026.