10-Step M&A Process
If you work in either investment banking or corporate development you’ll need to develop an M&A deal process to follow. Investment bankers advise their clients (the CEO, CFO, and corporate development professionals) on various M&A steps in this process.
A typical 10-step M&A deal process includes:
- Develop an acquisition strategy – Develop a solid strategy outlining why the business should make acquisitions, and what the desired outcomes are
- Set the M&A criteria – Set specific criteria such as company value, industry, country, revenue, margins, growth, employees, etc.
- Search for acquisition targets – Use the above criteria to filter opportunities, which can arise from in-bound interest, searching on Capital IQ or Bloomberg, or using bankers
- Begin acquisition planning – This step involves reaching out to selected companies that meet the criteria and commencing a dialogue with management
- Perform valuation analysis – Once preliminary discussions have taken place a target company will likely provide detailed financial information which can be used to value the company in more detail
- Negotiation – After a view on valuation has been established an offer can be made and negotiations will go back and forth
- M&A due diligence – Once an offer has been accepted it will be subject to due diligence, a process of confirming that all information about the target is accurate
- Purchase and sale contracts – Upon successful completion of due diligence the final purchase and sale agreement can be signed (share purchase or asset purchase)
- Financing strategy for the acquisition – This step may occur earlier, but the final strokes of financing will come into place after the deal has been signed but before it closes
- Closing and integration of the acquisition – Finally, the official transaction closes (tombstones are handed out) and the long process of integration begins