M&A process introduction
Mergers and acquisitions (M&A) are important growth strategies for companies. There are numerous benefits of merging with or acquiring another company, including expanding your business, cutting costs and increasing efficiency.
However, an M&A deal is not easy, especially if you want to get the best value from it. To do that you need to know what you’re getting into before signing on the dotted line.
Understanding the M&A process with the major milestones and key steps is crucial for the ultimate success of the deal. So, how to succeed with your M&A process? Get familiar with our process and even newcomers can learn how to lead and create value in any M&A deal.
For any deal it is crucial that both seller and buyer have a general understanding of the milestones and key steps of a standard Mergers and Acquisitions process.
This process is a typical buy-side m&a process.
What is M&A?
An M&A is a type of corporate transaction where two companies combine operations and/or assets. The two types of M&A transactions you will most commonly see are: mergers, which occur when two companies with separate operations decide to go into business together (for example, when an online retailer merges with an online grocery store) and acquisitions, when one company buys another company.
You can also think of mergers and acquisitions as two ends of a spectrum. Mergers are when two companies decide to go into business together, while acquisitions happen when one company purchases another company.
Acquisitions often occur when one firm buys another that has entirely distinct offers, but mergers frequently take place between businesses that offer comparable goods and services.
What are the three stages of M&A?
M&A is a complex process that involves many interconnected activities.M&A deals typically involve three stages: M&A strategy, M&A transaction and M&A integration.
The aim of the process is to create value for shareholders by acquiring an existing business.
The overall objective that drives the acquisition process; often referred to as the “why” of the deal. See our M&A strategy template following the link.
The purchase of shares or other ownership interests in a company by an existing shareholder.
The integration of operations, employees and other resources acquired from an acquisition into the company's existing business operations.
In addition to these broader activities, there are also specific M&A processes that companies follow at each stage of the M&A lifecycle: Strategy, Transaction and Integration.
While these processes can vary depending on the size and nature of a particular deal, they will generally follow a similar path as described in the next part.
The three stages of a M&A deal
Stage 1: M&A strategy - Mapping Out Your Company’s Strategy
The first step of your M&A process is to map out your company’s strategy.
Before you start looking at possible acquisition candidates, it’s important to define your goals. This will help you navigate the M&A process and make strategic decisions along the way.
You can do this by answering a few questions:
- What are your strategic goals?
- What do you want to achieve by pursuing an M&A strategy?
- What is the financial goal?
- How does the acquisition fit into your strategic plan?
Now that you know where you want to acquire from, it’s time to find the right company.
Stage 2: M&A Transaction - Due Diligence and Negotiations
Due Diligence process
Now that you’ve found the right acquisition targets, it’s time to dig into due diligence. Due diligence is the investigation that takes place when one company is considering purchasing another company.
During due diligence, an acquiring company will investigate a potential target company to examine its financial statements, management, operations and any regulatory issues.
You can do this by asking yourself a few questions:
- What do you need to investigate during due diligence?
- What information do you need?
- What are your critical success factors?
- What are your cultural and operational risks?
- What are the key risks and how will you mitigate them?
By answering these questions, you can get a better idea of what to expect during the due diligence process.
M&A deals are complex and typically involve a series of negotiations between the acquirer and the target. The main goal is to strike a deal that is mutually beneficial for both parties.
In order to do this, both companies will have to put their best foot forward in order to win over the other party. It is critical for businesses to understand the needs of the other party before entering into negotiations and to ensure that they are prepared for any eventuality that may happen throughout the process.
There are several ways that an acquirer can help to facilitate M&A negotiations.
First, it can take the lead in identifying targets and building a relationship with them. Second, it can help to negotiate key terms such as price and terms of payment. And finally, it can help to ensure that all relevant parties are on board before moving forward with the deal.
By taking these steps, you can ensure that your M&A deal goes smoothly from start to finish.
Stage 3: M&A Post Meger Integration
M&A integration can be challenging for any organization, but especially so when a deal entails new systems and processes that need to be mapped and streamlined.
All too often, businesses fail to plan for M&A integration. This can lead to a host of issues ranging from unexpected costs to poor employee morale. Ensure that you have a clear plan in place for post-M&A integration. Ensure that your integrator is on retainer, and that you have the resources in place to support the scale of the integration.
There are many variables at play when it comes to integrating two organizations, ranging from cultural differences to operational efficiency.
To ensure your company’s post-M&A integration succeeds, here are seven things you need to keep in mind as you navigate the process:
- Dedicate Resources. Choose members of the integration team.
- Focus on Leadership. Bring in a seasoned, unbiased leader.
- Structure the integration project. Actively Manage the integration process.
- Define essential business processes and systems.
- Make an internal communication strategy.
- Put people first. How will you keep your employees motivated and productive?
- Maintain your cultural advantage. How will you deal with change resistance?
How long is a typical M&A process?
The mergers and acquisitions (M&A) process is lengthy and can take anything from 3 to 18 months, depending on the size and complexitiy of the deal. Today we witness shorter M&A processes.
How long does M&A due diligence take?
M&A due diligence takes time. Depending on the scale and complexity of the deal, it might take anything from a few days to several months (typical 3 to 9 months). As such, it’s not something you can rush through.
M&A Milestones and Key Steps: Summary
An M&A deal is not easy, especially if you want to get the best value from it. To do that you need to know what you’re getting into before signing on the dotted line.
M&A is a complex process, and it can be challenging to navigate successfully. Ensure you are familiar with the following M & A process steps:
- Strategy Concept
- M&A strategy
- Market screening & target identification (long & short list)
- Company profiles, strategic and cultural fit, initial valuation
- Project team and advisors
- Game plan
- Internal project approval
- Approach target
- Sign NDA- Negotiations
- MoU or Letter of Intent
- Due Diligence
- Business plan & final valuation (incl. synergies)
- SPA Negotiations
- Deal structuring (incl. tax)
- Internal board approval
- Define integration plan
- Deal Signing & Closing
- Internal & external communication
- Day1 Kick-off- Integration implementation and management (6 & 12 months project review)
- Maintain focus - track and realize synergies
- One year after closing: Review and report to board
- Portfolio Management
- Lessons learned (improve the internal process)