Hero dark

M&A Process…. But what is M&A?

Mergers and acquisitions is the idea of connecting two businesses through assets, shares or stakes. But what could a novice with only market-specific competitive knowledge understand about merging with different companies? That’s where the Valley Biggs buy-side and sell-side M&A come into play. The M&A process is a comprehensive consolidation of multiple businesses and their entities. This entity includes financial transactions, agreeing on deals, and extensive research with planning.

M&A Process Timeline

Depending on the size and complexity of the deal, a typical M&A process can take six months to several years till finalization. The comprehensive review, integration plan, and due diligence, all take around two years. For a more generalized outline of the key stages, read below,

  1. Preparation And Planning

    From defining strategic objectives to assembling an M&A team and engaging advisors, it takes around three months. During this time, the team identifies potential target companies and assesses market or industry conditions and trends.

  2. Preliminary Due Diligence

    Preliminary due diligence means conducting a high-level target assessment and taking around two months. This includes the evaluation of strategic fit and preliminary financials for signing confidentiality agreements and requesting initial information.

  3. Negotiation And Letter Of Intent

    After careful valuation analyses, the team negotiates terms and conditions for transactions. It means drafting and finalizing a non-binding letter of intent (LOI) to secure exclusivity. This process takes two months.

  4. Integration

    All the dynamics are finalized under integration. This includes developing deals, aligning business operations, achieving synergies, and ensuring all financial transactions are made. This step in the M&A deal process timeline can take around six months to one year.

The M&A Process Delay Reasons

These deals are intricate, and the business transactions hold importance on growth level. Even with extensive research and excessively careful implementation, there can be delays in the M&A deal process.

Some of these reasons include,

  • Regulatory Scrutiny
    The most time-consuming process is the regulatory approval. There can be delays in obtaining these approvals because of antitrust agencies, government authorities, and industry regulations.
  • Negotiation Dynamics
    When there is an investment bank involved while negotiating the terms, it can become complex. The reason can be disagreements around deal structuring, pricing, and funding protocols.
  • Financing Complexities
    When there is third-party dependency, the legal advisors and consultants are always in a bit of a nit. The reason is delays in equity investment or securing loans. While differences in methodologies for valuation analyses can cause disputes, the close deals are delayed over commitments from a potential buyer and seller. Economic conditions, credit markets, and the financial health of the parties involved can all impact the availability and terms of financing.
Fast personalized service

M&A Acquisition Process Key Players

When we talk about the M&A acquisition process, it cannot happen without key players. Now, the key players aren’t just the buyers and sellers. The synergy revolves around the idea of picking our potential candidates who hold extensive market knowledge and understand the industry trends. A few of the key players include,

  • Management Team
    In approving the deals and transactions, the board of directors and shareholders are the management team. Regarding the terms of the deal, this team votes on the prices, structure, and significant changes to the company’s strategic direction.
  • Strategists
    While implementing the acquisition strategy, the strategists assist with navigating regulatory requirements. These include approval from the government and antitrust agencies. Besides ensuring compliance with rules and laws, some risks and challenges need to be kept in mind while dealing. These strategists help in overcoming such situations if they arise in the acquisition process.
  • Legal Counsellors And Advisors
    The sale of your business cannot comprehend the intricacies of deals without a legal counsel and advisor. To overcome challenges like drafting law-abiding deals and legal documentation, sellers and buyers inquire for help from experts. From conducting reviews to negotiating deals, legal counselors and advisors play a vital role.
  • Due Diligence Team
    There are two types of due diligence teams. One is the financial and the second is operational. The financial due diligence team comprises of financial accountants, analysts, and valuation experts. The operational consists of teams that assess business operations like supply chain, manufacturing processes, and infrastructure.

M&A Process Steps

This guide is incomplete without details on the steps of the M&A process. Before we get into that, we also need to understand the complexities of how Valley Biggs works. From strategic planning to understanding objectives, all are included in the M&A process steps.

Step 1: Developing Strategies

The first step is developing a strategy. This means ensuring definitive objectives and reasons. A strategist helps set clear expectations for the client by tailoring a unique deal and creating a survey as per the requirement of the buyer or seller.

Close up of the hand of a business woman using

Step 2: Identifying Targets

The second step is identifying targets that determine constituents. In the case of a general merger, the M&A only identifies the target whereas in a triangular merger, they identify the target and subsidiary. This step includes an understanding of the client, their working industry, and their location.

Value proposition

Step 3: Analyzing Valuations

When one works as an analyzer of valuation, it means all the details of the company or share is studied. Like determining the fair market value by using methodologies like discounted cash flow and comparable company analysis.

Market analysis

Step 4: Negotiations And Letter Of Intent (LOI)

In a deal, the negotiating terms are not limited to pricing and structuring. It includes future values that a specific deal holds and also drafting a non-binding letter of intent to outline initial terms.

Exit strategy scaled

Step 5: Due Diligence

There are four aspects of due diligence: financial, operational, legal, and regulatory. All identify the risk and potential deal-breakers on both sides.

Marketing collateral

Step 6: Deal Closure

Now the final draft and definitive agreement come into play. The deal is closed and the transfer of ownership along with payments are made.

Managing deal points

Step 7: Financing And Restructuring

After evaluating definitive agreements, there are two forms necessary for filing. These are UCC1 and UCC3. The UCC3 forms are used to amend, continue, assign, or terminate a previously filed UCC1 Financing Statement. Both these forms ensure secured transactions.

Create a target

Step 8: Integration

For detailed examination and analysis, the team develops and implements a post-merger integration plan. This aligns with the business, system, and culture for optimal synergy.

Manage mandates

M&A Legal Process

The team pays careful attention to the legal process. These are two types of M&A legal processes.

  • M&A Auction Process
    Some potential buyers solicit bids to maximize values for the seller. Investment banks or advisors manage these auctions by contacting qualified buyers for negotiable deals and confidentiality. The auction process fosters competition, driving up the purchase price and providing the seller with optimal value for their assets.
  • M&A Bidding Process
    The bidding process is a bit different. The M&A buyers are presented with potential deals that tailor their needs of interest in investing. Besides indulging in due diligence for evaluating risks and SWOT analysis, the bidders or sellers may choose to negotiate with companies of interest.
Buyer qualification

Phases Of M&A Process… Best Practices

To enhance the efficiency and effectiveness of phases of the M&A process, it is pertinent to understand the best practices. The buyers and sellers may have extensive knowledge of market trends. However, finding someone who understands the target market is the vision of mergers and acquisitions.

For the buy side, when dealing in M&A, there can be two acquirers, strategic and financial. When we talk about strategy, they tend to have an absolute hold of the companies in adjacent industries and fully grasp the core of businesses. However, the financial acquirers are not always strategic. These buyers can be equity firms. They tend to perform a leveraged buyout (LBO) for transactions and dealings.

For the sell side, it is better to focus on the strategic approaches of WHY the buyer wants to buy the shares. This entity can open up a lot of opportunities like a buyer, who already has an intensive understanding of the market, can help the seller’s company to grow after buying shares.

Multiple buyers

M&A Sale Process

The M&A sale process records the dry powder of the company. This means that at some stage of business envisioning, a proposition might come knocking at the door of the CEO for sale. This entity widens the opportunities for maximizing shareholder values.

From creating a motive for acquisition to due diligence, the seller’s scheme provides a memorandum and prepares management’s presentation. Let’s dig deeper into the sale process.

One must only investigate selling shares or stakes after valuing a big proportion of their business. Some might sell for personal reasons like stepping out of the business or growing a middle-class business to some standards. The focus is always on the analysis of the conservative growth projections to lower risks of failure in the future.

Enter a letter of intent

M&A Process Map

After studying the detailed process of mergers and acquisitions, we can now move to lesser talked aspects through the M&A process map. The first one is building strategies. This entity adds interests of individuals from selling and buying about mergers and acquisitions. M&A is not a strategy but a tool so one can remember that strategies are straightforward and come with a plan.

Back in 2012, Disney purchased Lucasfilm to get a stake in selling Star Wars merchandise on its platform. This is how you plan a strategy.

Next is deal sourcing. Now to acquire a target company, there are a few questions that need answering. The kind of companies to buy and the size of the target companies are very important.
After careful analyses of potential deals, a legally binding document also known as a non-disclosure agreement comes into play. This document is a confidentiality report on the agreed terms and conditions.

The NDA is more important on the seller’s side than the buyers as there is the release of confidential information from the seller’s side.

There are a few valuation methods that ensure the determination of company value. These are,

  • Market value valuation method
  • ROI-base valuation method
  • Discounted cash flow valuation method
  • Multiples of earning valuation method
Debt equity partners

M&A Closing Process

After spending months researching market trends and industry value, the closing process comes in. For the M&A negotiation process, the two teams from both sides finalize the terms of the transaction. This includes negotiations regarding representations and warranties, indemnification provisions, and deal structuring.
By close the deal, refers to the final stage. When all closing conditions are met, the ownership is transferred to the buyer, payments are finalized, and the deal is officially closed. This entity also includes a transaction process that encompasses the acquisition of one company to another.

An acquisition deal refers to the agreement between the buyer and the seller for the acquisition of a target company. It outlines the terms and conditions of the transaction, including the purchase price, payment structure, closing conditions, representations and warranties, and other relevant provisions. When executing a business, both teams from the seller and buyer sides ensure that the transaction process is smooth.

Since the seller is tasked with sharing sensitive information, the NDA is signed. This step ensures no problems will arise in the future as the understanding and navigation of the complexities of the M&A process is finalized.

Manage the qoe

Mergers And Acquisitions Process…Types of Acquisitions

To achieve objectives strategically, companies prolong the use of acquisitions. The most common type of acquisition is a merger where two companies under the same entity swap stocks and merge into a new entity. In vertical acquisition, the company acquires another company working on a different stage but in the same industry to reduce costs and gain access to new distribution channels. The horizontal is when the company acquires another company working on the same value and in the same stage.

Manage the legal process

Let’s Start Your Journey

We’re business owners and serial Tech entrepreneurs ourselves. That means we understand how your business operates from the inside out. Most advisors don’t have a well-rounded understanding of the space, or how to quantify the value proposition a Tech or Internet business offers. We can. The insights and understanding we’ve developed in two decades of buying and selling Internet companies make us the perfect choice to be your business broker. Our clients love us – and you will, too.