How to Make Your Next M&A Deal Successful
The path to success is rarely straight. To achieve business goals companies have to raise investment, pivot, acquire other companies, or get acquired.
Therefore, one of the most common deals in the business world is M&A, which gives businesses new opportunities for diversification, growth, and other advantages enabled by the power of synergy.
What are M&A deals?
M&A stands for Mergers and Acquisitions, the process of two firms becoming one on different conditions.
Key outcomes are what makes these two procedures different: mergers mean that two companies transform into a united company; acquisitions stand for one business taking control of another one.
The sequence of steps to prepare for an M&A
Although mergers and acquisitions present different outcomes for involved parties, both deal types have a similar flow:
1. Choosing a strategy
At this stage, buy- and sell-side build a strategy they look to follow during the M&A process. This step allows both sides to fulfill their business objectives and walk away from risky deals.
2. Target setting
It has to do with defining a more precise definition of the deal goals: this step helps parties to qualify potential buyers or sellers.
3. Building a database and prospecting potential targets
The buy-side picks a target industry to collect a list of available companies; the sell-side gathers a list of potential buyers or partners who might be interested in purchasing or merging in the first place. The goal of this step is to create a list of businesses that might be an ideal fit.
4. Negotiating the deal
The success of this step for any side of the deal depends on a number of factors. It can be a leverage a party has like a price and other key terms, risks, competition among acquirers for the target company (or vise versa), etc.
5. Managing due diligence
Due diligence in the M&A deal is a process of analysis of the target’s operations and properties, i.e. customers, finances, employees, legal matters, intellectual property, etc.
6. Signing and closing the deal
Finalizing purchase and signing contracts are pre-final steps in the M&A deal. In case of a delay between signing and closing, the M&A agreement needs to include the closing conditions.
7. Parties integration
The step of integration of two companies starts after the deal is closed and can take a while. However, if parties started discussing the integration process at the beginning of the M&A deal, it would not pose a problem to any of the sides.
How to secure an M&A deal
Before, during, and after a merger or acquisition, the main issue companies face is security flaws. Dozens of documents, stakeholders, collaborators make the process vulnerable to different kinds of frauds. To avoid the risk of data leakage at any step, companies of different sizes from Fortune 500 to small startups use virtual data rooms. This web service dedicated to storing sensitive documents and securing all kinds of interaction with them allows businesses to focus on the deal itself.