A Stepwise Guide to Ensuring a Successful Acquisition
A successful acquisition process involves several steps that may take anywhere from a few months to years to complete. It is the consolidation of multiple assets and business entities through a chain of financial transactions. The process includes different steps from start to finish, like planning, due diligence, research, implementation, and closing. This stepwise guide will outline different steps involved in an acquisition process. Experts may offer M&A support through each step to ensure success with an acquisition.
Developing an Acquisition Strategy
The acquiring party must be clear about its expectations and goals to develop a successful acquisition strategy. It must have a clear idea of what it expects from acquiring the target business, be it to access new markets, expand product lines, etc. The buyer must strategize considering the financial position, future projections, and current market conditions based on the objectives.
Setting the Criteria for Searching Targets
After defining the acquisition goals, the buyer must decide the type of company they wish to acquire. The choice may vary depending on the company size, customer base, product or service offered, financial position, culture, etc. Setting a general criterion for searching targets will save time scrutinizing inconsiderable candidates.
Beginning the Search
Once the prospective buyer sets its acquisition goals and criteria, it may begin looking for the ideal candidates. At this stage, M&A support from experts comes of great help. They perform brief evaluations of the potential targets, analyze their financials and performance, predict their prospects, and recommend the most lucrative acquisitions. Using data-based solutions, they save the acquiring company from making wrong decisions.
Planning for the Acquisition
Once the buyer shortlists a couple of potential candidates, it’s time to make the initial contact. The first step is to send them a teaser or letter of intent expressing interest in acquiring the company. The LOI should provide a synopsis of the proposed acquisition. M&A support providers may help create a convincing, high-level LOI, subject to change at this level. The initial point of contact is the right time to gain information crucial for valuation.
Valuating the acquisition is one of the most decisive steps in the process. The buy requests important business-related information from the target company, including the financials. The buyer evaluates its value as a potential acquisition and a stand-alone company based on this information.
Besides analyzing the financials, considering external conditions, culture fit, and other factors is also important to time the deal. The buyer may require multiple valuation models to decide whether to acquire the company or not. This is where hiring acquisition support providers is vital to perform valuation based on their weaknesses, strengths, threats, and opportunities.
Negotiating and Signing the Deal
Based on the valuation models, the buyer presents the deal to the company. Negotiations start based on the deal offered. Once both the parties mutually agree on the terms and conditions, they finalize and sign the acquisition deal.
In an acquisition, evaluation refers to due diligence to ensure all details are in order before finalizing the transaction. The buyer must calculate the culture fit, analyze operations, and create a financial model for evaluation. The letter of intent provides a timeline for due diligence, depending on the company. M&A support from experts makes the entire process smoother for both parties.
Creating the Agreement
Once the evaluations are complete, the time comes to create the final agreement according to the type of purchase being entered. The transaction is considered ‘closed’ once all the parties sign the contract.
Devising the Financing Strategy
Although buyers already analyze and create their acquisition strategy around their finances, they may still need to make adjustments before signing the final contract.
After finalizing the deal, both parties can begin integrating the firms. It takes a lot of planning in different aspects, including the organizational structure, finances, culture, roles and responsibilities, etc. Integration is a constant effort requiring ongoing evaluation and monitoring for several months to come.
It is hard to acknowledge that most acquisition deals fail to achieve success even with this information at hand. The primary reason for poor performance is not monitoring implementation through all these steps. This is where experienced professionals come of value. They provide M&A support at each step to maximize value and improve financial and market performance.