There is no doubt that M&A is an effective way for companies of all sizes around the world to speed up their growth. The process of acquisition is fraught by potential pitfalls, which could lead to acquired businesses losing their value. Making sure you follow these four steps to an acquisition that succeeds can help you avoid common mistakes and make your next acquisition a winning strategy to increase growth.
1. Develop a strategy for acquisition.
One of the primary reasons for failed acquisitions is poor planning. By establishing an acquisition strategy from the beginning, you can make sure that your business is maximizing its potential and staying on the right path with your M&A goals.
Typically, this means establishing an initial list of M&A target companies and then narrowing the list by the use of search criteria. These could include things like the industry sector, deal size, market share and operational scale. Corporate development teams can make use of numerous resources to find M&A potential buyers, including online sources such as DealRoom and LinkedIn, trade journals and industry associations, and the databases of investment banks and private equity firms.
2. Establish a team that will take charge of the M&A Process.
It is crucial that management teams create teams that are led by a senior executive who can oversee the M&A from start to finish. This is critical to ensure that the strategic goal of the acquisition doesn’t get lost along the way and that the process of integration runs smoothly. It is also essential to have human resources experts on the M&A teams to estimate the cost of compensation and benefits and quantify actuarial estimates of pension and financial liabilities.