The M&A process usually involves two companies. Either, one company will acquire the other company. Or, the two companies will merge. In any M&A deal, both parties put forth a tremendous amount of work and detail. In order to complete a deal, the M&A process can take several weeks, months or years. To get the best deal for the acquiring or acquired company, financial advisors use mergers and acquisitions to grow their business. If you are about to start the M&A process, be sure to include these steps on the seller side.
Create A Selling Strategy
Firstly, you need an overall strategy before starting an M&A process. The selling strategy should include what your company has to offer to an acquiring company. It outlines the type of M&A partner you are looking for. Moreover, details like target prices, deal terms and timelines are great inclusions to the strategy. Once completed, the selling acquisition strategy will guide your decisions throughout the entire mergers and acquisitions process.
Shortlist Target Buyers
Next, research the potential buyers for your company. The buyers can be in your industry or another sector. The key to finding the right merger or acquirer lies in the company “fit”. If your financial team can demonstrate a horizontal or vertical fit for the buyer, there is a good chance for a M&A negotiation to take place. Additionally, the target acquisition buyers need to have enough capital on hand to meet your asking price in the M&A closing. It can be your larger business competition too. Therefore, be sure to choose the right list of buyers to start the M&A process.
Create An Executive Memo
To start the M&A process, send an anonymous letter to attract buyers. The letter should contain just enough business information about the deal to get buyers interested. You can include surface details like products, customers or financials. Importantly, the anonymity of your letter protects the M&A deal’s confidentiality and your brand reputation. If the target buyer is interested, they can simply respond to the letter for acquisition details.
Share Data for M&A Process
After getting a company or two interested, you must share data within the M&A process. Most companies sign confidentiality agreements to maintain integrity of the deal. Then, the two sides can start sharing data about the M&A analysis. At this point, you can offer a full “pitch” to the buyers. Management will either meet or send a formal pitchbook for review. Presently, the process is fully underway as information can be exchanged.
M&A Negotiation Process
Once presentations are made, the negotiation part of the M&A deal begins. Typically, the buyer side of the acquisition will perform due diligence on your company. They might address concerns and liabilities with a business lawyer. On the other hand, your financial team will work to find the best “fit” that creates value for both companies. To find the best fit, you bring multiple potential buyers to the negotiation table. Then, all the potential companies involved can make the best offer possible. Of course, you can proceed with the M&A partner who best fits the company’s acquisition strategy to close the deal.
These are the main points of an M&A process. They all create value to find the right buyer for your merger or acquisition. Try to attract quality potential acquirers. Several options will give you more negotiation power towards the end. Above all, stick to your original M&A strategy. This way, your finance team can walk away if buyers are not aligning with your overall strategy. Your strategy, outreach and negotiation will guide a successful M&A process.
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