While every deal is characterized by its own strategic logic, most successful deals have specific, well-articulated value creation concepts from the very beginning—while the strategic rationales of less successful deals can be vague. According to a May 2017 report by McKinsey & Company, the strategic rationale for an acquisition that creates value (providing the buyer did not overpay) typically conforms to at least one of these six scenarios:

1-Improve Performance of Target Company

Probably the most common value-creating acquisition strategy is to buy a company, reduce costs to improve margins and cash flows, and perhaps takes steps to accelerate revenue growth. As the McKinsey report points out: “Keep in mind that it is easier to improve the performance of a company with low margins and low returns on invested capital (ROIC) than that of a high-margin, high-ROIC company.”

2-Remove Excess Capacity

Consolidation is the strategic rationale here. Maturing industries can generate more supply than demand from a combination of higher production from existing capacity and new capacity from recent entrants. According to McKinsey, “While there is substantial value to be created from removing excess capacity, as in most M&A activity, the bulk of the value often accrues to the seller’s shareholders, not the buyer’s. In addition, all the other competitors in the industry may benefit from the capacity reduction without having to take any action of their own (the free-rider problem).”

3-Accelerate Market Access for Target’s (or Buyer’s) Products

Reaching the entire potential market for their products can be a challenge for relatively small companies with innovative products. “Small pharmaceutical companies, for example, typically lack the large sales forces required to cultivate relationships with the many doctors they need to promote their products,” according to McKinsey, and, “Bigger pharmaceutical companies sometimes purchase these smaller companies and use their own large-scale sales forces to accelerate the sales of the smaller companies’ products.”

4-Acquire Skills or Technologies Faster or at Lower Cost Than They Can be Built

Apple’s purchase of Siri ((the automated personal assistant) to enhance its iPhones is a perfect example of this strategy. The McKinsey report concludes: “Many technology-based companies buy other companies that have the technologies they need to enhance their own products. They do this because they can acquire the technology more quickly than developing it themselves, avoid royalty payments on patented technologies, and keep the technology away from competitors.” Obviously, this is a winning strategy when all the elements fall perfectly into place.

5-Exploit Industry-Specific Scalability

While economies of scale can be a major source of value creation in M&A, the rationale does not always work for a variety of reasons. For example, in large acquisitions, many big companies already are operating at scale and combining them may not lead to lower unit costs. And, rarely do generic economics of scale such as back-office savings justify an acquisition. In short, economies of scale must be unique and industry-specific to be large enough to justify an acquisition.

6-Pick Winners Early

It may sound easy, but, of course, it definitely is not. All a buyer must do is pick a winning company early and help them develop their business which means making acquisitions early in the life cycle of a new industry or product line. As McKinsey points out, this acquisition strategy requires a disciplines approach from management: “First, you must be willing to make investments early, long before your competitors and the market see the industry’s or company’s potential. Second, you need to make multiple bets and to expect that some will fail. Third, you need the skills and patience to nurture the acquired businesses.”

Successful acquirers always specifically translate strategic goals into something tangible. The McKinsey report offers this final advice to M&A strategists today: “By focusing on the types of acquisition strategies that have created value in the past, managers can make it more likely that their acquisitions will create value.”

In short—study, analyze, and strategize to build your own history of successful acquisitions—and FOCUS is a great place to begin.