How to Prepare Your Company for a Successful M&A? 

A merger and acquisition can leverage a company to come across its geographic boundaries. It can expand the scope of services, effectively attaining the leadership in its niche. Over time, the globalisation and lenient commerce policies have increased the number of M&A deals. The spike in the number of deals is obvious with favourable trade conditions.  

Discover the Vision

There are two parties involved in a deal, which are buy-side and sell-side parties. If the strategic vision of both parties are similar, closing the deal becomes easier. Otherwise, a mismatch in their vision can cause conflicts between them. It makes it really hard to complete the deal. 

However, there are many vital aspects in it, which are associated with structured performance. It should be incentivising for the buying party. If it is able to retain the acquiree’s staff or employees, the deal turns out successful. In all, it becomes crucial to see if employees are ready to go with the wave of change and continue to serve for the company. Having flexibility to work with different leaders and team is actually a positive sign for the company. The buy-side company should be skillful because it is likely to acquire another company for the benefit. It may lose the most if the transaction does not happen.  

Changing Valuations and Deal Structure

However, it’s a lengthy process and sometimes, the M&A transactions may take as long as a whole year. It can happen because of changing valuations, which can be inspired by several reasons. The buying party should foresee the changing valuation. Avoid linking it to distrusting the buyer. 

Take into account that the structure of the deal depends on various factors, such as the percentage of the overall deal being paid up front or the number of years the founder agrees to keep it. The acquirer should measure the acceptable amount of risk that it can bear willingly and how much it’s going to cover up front. 

It’s noteworthy that the majority of deals are based on a payment model. It ensures that the sell-side company will have a certain percentage of sale value once everything successfully goes on as per agreed terms and conditions. Although, non-competition clause is predefined for the founder in most M&A deals. This clause defines that the founder of the acquired firm is not permitted to set up another entity in the same domain for a mutually agreed time period. 

Minimizing Cost of Transaction

The biggest hurdle in the deal lies in taxation. However, acquisition can happen through different models, which can be full-stock sale or selling its IP. Every structure or model comes up with its unique challenges in taxation, which can be associated with corporate tax, GST, and dividend tax. However, there are many onlinedeal-discovery platforms that come up with virtual data rooms. Here, the buy-side entity can determine the best deal. It can be concerned with optimising tax savings. 

Crystal Clear Book of Accounts 

As aforesaid, financial due diligence is the longest process, which makes it a lengthy deal. For making it a success, the acquired company should properly maintain a paper trail or documentation for all transactions that have been conducted. Ensure that every transaction by the seller company is easily detectable. In addition, what agreements it has made should be there accurately with all billing details and cashflow in its bank account. The robust deal-making platform or broker can help in properly managing transactional hygiene or detailed financial statements in the book.

Hire a Professional

This is necessary to hire an M&A professional with a sound domain knowledge. His hands-on experience can guide engaged parties with accurate transaction process. Considering bankers or lawyers who have done it before should be considered for the deal-making. Their experience helps in overcoming challenges that interfere with transaction journey. Also, they can guide you to narrow down the list of potential buyers/sellers, share valuation, measuring the synergies, and maximising profitability. Mostly, such professionals are expert at forming a valuation negotiation strategy and setting up a structure that includes the valuation and other verticals of the transaction. Simply put, their experience can make the whole M&A journey smooth and fast.  

Is It Good to Go for M&A Deal?

Certainly, it’s an excellent decision to go for this option. This is the best alternative to scale the company’s portfolio, geographic reach, and further integrations.  But here, the main concern is vigilance. Transactional data is sensitive, which should be proactively controlled. So, you should be more careful during transactions. For smooth sailing, ensure hiring a professionally trained and experienced banker who knows how synergies should take place. It’s also necessary to be very clear for scheduling transactions, measuring ups and downs in valuation, and maintaining data. These all factors together ensure the success of transactions, evaluating the tangible and intangible values for stakeholders. 

Summary 

The merger and acquisition deal can be successful if you consider a few necessary points. You should prepare for the M&A deal by understanding vision, hiring a professional, managing accounts, and more.