In a business, things can change at the drop of a hat – from losing a valued employee to gaining traction overnight and even the proposition of selling your company or having it bought out. Therefore, you must prepare for anything and everything.
Mergers and acquisitions (M&As) can be highly robust or relatively simple, depending on the companies involved. Generally, mergers allow for a continued effort between both parties, often forming a new organization, whereas acquisitions are usually seen as the purchase and depletion of one or more companies. The terms of each deal vary greatly depending on the specific circumstances, but there are certain steps that almost every merger or acquisition sees.
1. Strategy development.
The first step in any merger or acquisition is to understand the full scope of what your company can handle and what the company in question can provide. Next, the buyer identifies their ideas and the reasons behind the merger or acquisition, and the monetary and operational goals and abilities required.
2. Identifying targets.
After conducting an overall strategy development, the buyer identifies potential targets. These targets should fit their criteria – from industry to finances and everything in between. There must be mutual understanding and interest for a merger or acquisition to move beyond this step.
3. Exchange of information.
If both parties agree to move forward, they share documents, including financials and company history. This allows both parties to determine if they would like to continue the M&A.
4. Offer and negotiations.
If both parties determine the M&A to be beneficial, you’ll head to the offer and negotiate step. The buyer will offer cash or stock options. The seller can either accept the offer or negotiate different terms. This step takes longer if multiple buyers are in question; generally, the seller will choose the highest offer.
5. Due diligence.
Once the negotiations have been nearly completed, the buyer will conduct due diligence to determine the next steps. If there are no discrepancies between the provided information and the research of the company, the M&A should proceed. However, if there are discrepancies, the negotiations begin again.
6. Close the deal.
Closing is the most critical step of any M&A transaction. When both parties agree to the terms, legal teams become involved. They ensure that each party agrees to terms, provides all documentation, handles tax information, and much more.
After the deal is closed, the merger or acquisition is finalized. If the deal is a merger, both companies will create a more successful business. If the deal is an acquisition, the buying company will fully own the absorbed company and can create new rules and policies as they see fit. After a merger or acquisition is complete, companies will often see restructuring at every level.
At ABCO Group, we have been on both ends of mergers and acquisitions. We know what goes into each and how to make the most of each situation. Mergers and acquisitions can create new business opportunities and new ideas. When handled correctly, M&As can be the lifeline you didn’t know your company needed.