What Factors Should Be Considered in the M&A Process

Did you know that the failure rate in mergers and acquisitions is around 90%? That means 9 out of 10 M&A attempts or integrations turn out as a failure. Some major reasons behind this include unclear objectives, ineffective project management, and lack of communication between stakeholders, shareholders, and leadership from both sides.

M&A deals are not just everyday business purchases; it is about the integration of two different business entities. Here are some handy tips to boost the chances of a successful merger or acquisition.

Essential Factors to Consider in Mergers and Acquisitions

Whether it is a merger or acquisition, here are some important things to consider for both transaction types.

1. Consider why this deal is important

It is normal for the management to get attracted to a specific brand or business, but here are some questions that management should answer before preparing to M&A:

  • How will this company fit into your business strategy?
  • How do you convince your shareholders or stakeholders or justify your stance?
  • Will this merger or acquisition support your corporate vision and mission?
  • Do you just want to acquire this company for a specific product and strengthen your product line?
  • Do you wish to acquire the company, or are you more attracted to the team that drives it?

Businesses often make mistakes by acquiring other companies just because they are cheap, but it can backfire.

2. Study the Target Company

When you decide to acquire a company because of its products, customer base, brand identity, management, or all these, make sure you are well aware of its liabilities, responsibilities, contracts, legal obligations, agreements, and lawsuits, as they are a part of the parcel.

One of the best ways to assess these things is to hire investment advisors and financial planners that specialize in advanced investment strategies. These professionals are highly skilled and trained in evaluating the effectiveness and expected output of business investments.

To connect with the community of financial experts, talented investors, analysts, business development managers, and C-level professionals, head over to https://mnacommunity.com/. There you’ll find tons of expert materials, recommendations of M&A events, and some of the latest mergers and acquisition news.

3. Minimize the Communication Barriers

Communication barriers are one of the biggest hurdles in closing mergers and acquisitions successfully. That mainly happens due to geographically dispersed leadership and stakeholders. Intermediaries, shareholders, stakeholders, and board members from both sides should be able to communicate easily, which is only possible via digital channels.

However, it becomes challenging to manage safe and smooth communication between a large number of people, and that too on a regular basis. One way to tackle this issue is to use virtual data room software.

Virtual data rooms are digital data management and collaboration solutions with the latest combination tools, especially for mergers and acquisitions. For example, the Q&A module is commonly used for live Q&A sessions in M&As. Online data room software can also accommodate tens and hundreds of users on video conferencing. And on top of that, data sharing is much faster and safer in data rooms.

4. Streamline the Due Diligence Process

Due diligence is the most critical step in mergers and acquisitions, and this process should be made easier by any means. Most businesses back down during due diligence because of a lack of communication and ineffective data-sharing methods. If the target company doesn’t streamline things in due diligence, it could go on for weeks or months and end up in a failed transaction.

Target companies can make due diligence simple and effective by secure and fast means of data sharing. A huge number of companies use virtual data rooms for mergers and acquisitions due diligence. That’s because virtual data rooms solve multiple problems for both sides. Here is how:

  • Stakeholders, board members, and shareholders from both sides can be united on one controlled platform.
  • Both sides can engage in virtual meetings, online Q&A sessions, and discussions through group chats.
  • The target company can use data room software to share documents necessary for due diligence.
  • The acquiring company or its representatives can easily access due diligence documents remotely.
  • Online data room software allows real-time data sharing.
  • The target company can make sure its confidential information is not leaked or stolen by the buyer.
  • All the activities in the data room can be monitored and tracked, which keeps things transparent for both sides.
  • Both sides can save money that they might have to spend on traditional due diligence practices.

Some notable M&A virtual data room vendors include iDeals, Merrill, DealRoom, Caplinked, Firmex, FirmRoom, Intralinks, and Ansarada.

5. Do you Have a Post-Merger Integration Plan in Order?

Closing an M&A deal is just half success; it is important to have a post-merger and acquisition plan in order. It is better to have a dedicated integration management team. You can create that team from your company’s employees or hire third parties if you don’t have in-house personnel for it. Involving the post-integration teams in the pre-integration process can make their jobs easier.

Final words

Defining M&A goals clearly, minimizing communication barriers between both parties, streamlining the due diligence process, analyzing corporate documents carefully, and having a post-merger integration plan boosts the chances of successful mergers and acquisitions. We hope that following these essential steps will help you succeed on your M&A journey.

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