A Merger and Acquisition Process (M&A) is the consolidation of various business entities and assets via several financial transactions. This process involves each step from merging or acquiring a business from the beginning to the end.
In 2019, Canada recorded US$160 billion in deals due to corporations and private equity firms pursuing M&A processes as a way to create growth. Since these numbers signify a healthy market, it is now more important than ever to properly implement these M&A strategies.
At startMYplan, we are experts in Merger and Acquisitions and will provide all the steps necessary to ensure that this process runs smoothly.
Why undergo a merger and acquisition?
When you successfully implement an M&A process, your company will advance its position in the industry while enhancing its financial situation. It also allows businesses to create meaningful relationships where they can offer more products or services and become more visible in the market.
The Benefits of Merger and Acquisition
Mergers and acquisitions have a variety of advantages that can be superior over other types of growth strategies. These processes can make a business more competitive and dramatically shift them. Some advantages include:
- Improving accessibility to customers in new or existing markets
- Changing their market position radically
- Facilitates product or service expansion
- Creating barriers that halt competitive entries into the market
- Engaging in meaningful relationships with service providers
- Making operational strategies more efficient
- Being able to offer operational capacity, leading to services at a lower price
- Improving credit or your financial position
If you are looking to capitalize on these benefits, pursuing the M&A process requires full commitment and the necessary resources. Your company needs to be willing to implement the required planning and finances to make it worthwhile.
How long does a merger and acquisition take?
In general, M&As can vary in how long they take to be completed. It ranges from six months to a few years; it all depends on how complicated the deal is. It’s impossible to know exactly how long it will take, as you must keep delays in mind.
The Necessary Steps for an M&A Process
Identify Growth Markets and Services
The first step for an M&A process is discovering growth opportunities for your business. To do so, it’s essential to collect data and analyze it. You’ll want to incorporate demographics, client origin, employers, employees, costs, and consumer demands.
Discover M&A Candidates
Another essential step is to identify candidates that could enhance strategic financial growth goals, and this step requires a unique perspective. Then, you must identify prospective merger or acquisition clients that could create financial growth in identifiable markets.
This process entails choosing “likely suspects” or creative options based on management credentials, implementation of consulting services, thorough research, and more.
Analyze Strategic Financial Position
At this step, there needs to be a detailed evaluation of the acquisition target’s financial position. This analysis must take volume, cost, revenue, and your balance sheet into consideration.
It’s crucial to answer the following questions:
- What are the proposed benefits or risks of undergoing a transaction with the acquisition target?
- How does this acquisition target compare to others?
Another essential step in the M&A process is to assess the value of the target through one of three valuation methods: comparable transaction analysis, discounted cash flow analysis, and comparable publicly-traded company analysis.
The leadership team in your company should choose the best option to uncover an accurate valuation range. Once they make their decision, it’s essential to focus on the valuations aspect. If the valuation aspect does not go according to plan, it could sabotage your deal.
Due Diligence, Negotiate and Execute Transaction
When it gets to the point of the process where a deal is accepted, the leadership team for the acquiring company must perform due diligence of the target. That way, they can fully comprehend the risks that accompany the transaction.
For the due diligence process, the leaders must review the target’s operations to ensure the information is accurate. After this step, both parties can come to an agreement and must obtain regulatory approvals.
The acquirer will need to study the A&M to confirm that the transaction that has been negotiated will continually meet the goals that were agreed upon after the strategic assessment.
Monitor Continual Performance:
To monitor the performance continually, the analysis will have to answer the following questions:
- Will the management team make the challenging operational changes needed to secure financial benefits?
- Are there any factors to consider regarding human resources? Will there be support throughout for the employees, management, and
- What challenges are coming up legally and regulatory — like tax implications or court approvals?
- What are the potential risks regarding finances, organization, and community?
The key to a successful Merger and Acquisition process is that two companies need to comply efficiently. That way, the M&A process will ensure that the strategic value is maximized while not disrupting the current operations.
As M&A transactions continue to rise — jumping 85 percent to $96-billion since last year — navigating through each step of the process is more essential than ever. Be sure to plan accordingly and do your research – that way; you can ensure that the process will run smoothly.