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Defining the M&A Process


Key Takeaways:

  • Undergoing an M&A process is time-consuming and can take anywhere from six months to several years to close.
  • Engaging in M&A requires a clear strategy by both parties, with M&A advisors playing an important role in executing the strategy.
  • There are several phases to the M&A process and it is advised that no corners are cut for the sake of expediting the process.
  • An unprepared seller entering the due diligence phase can quickly derail a transaction, M&A advisors can help sellers prepare for and navigate the requests.
  • The M&A process does not end at the close, with integration being key to full realization of synergies.

The term “mergers and acquisitions” (or “M&A”) refers to the consolidation of companies or assets through a financial transaction. While often used interchangeably, they have distinctly separate meanings. In an acquisition, a company purchases another company, whereas a merger involves the combination of companies to form one larger company.

The mergers and acquisitions process can take anywhere from six months to several years, considering key factors such as complexity and scale. Sellers are advised to take their time when considering potential buyers and engage in many conversations. A rushed process can result in lost opportunities. 

Executing M&A

Deciding to sell brings about many questions. What does the mergers and acquisitions process look like? What is the best way to approach my mergers and acquisitions strategy? How do I know if I have the right buyer? What is the difference between a business broker and an investment bank? What is an M&A broker? Do I really need M&A advisory services? There are several phases of the M&A process which are essential to understand.

Phase 1

First, you must focus on preparing your business for sale. Both the buyer and seller should have a clear strategy in their M&A pursuit. The buyer plans out their method of pursuing an acquisition while the seller outlines the company’s goals when entering into a potential sale.

After the mergers and acquisitions strategy has been developed, the seller must create a kit to present to targeted buyers. M&A firms play a significant role in this aspect, as they are equipped with the skills and resources needed to market your company. This kit contains the comprehensive details potential buyers need to see, such as financials, products, services, and market position.

Phase 2

Next, sellers are ready to go to market and pursue rounds of bids. M&A experts assist the seller in this phase as they contact suitable corporate and institutional buyers. With an extensive network, M&A firms have a broad reach and work to get the greatest value for your business.

As more bidders come through, it can often be challenging to determine the “contender” versus “pretender” offers. This is when sellers receive a letter of intent (”LOI”) explicitly expressing interest in pursuing a merger or acquisition. Sellers may receive more than one LOI from interested parties. 

It is crucial to take into consideration potential synergies with interested buyers. Will your company integrate well with them? How will the organizational structure change? What kind of financial synergies are plausible? These questions can be answered with the help of your M&A advisor, who closely looks at all the data to ensure you are choosing the most beneficial path for your business.

Phase 3

After choosing a buyer, the seller moves on to negotiation, often with the help of M&A advisory services. At this time, the seller needs to ensure that they have all the necessary information to move forward with a deal.

Buyers and sellers will work together to draft a definitive agreement for the final deal and then enter into an exclusivity agreement. After entering into exclusivity, sellers are prohibited from pursuing further negotiations or attempting to seek interest from other buyers.

While it may take 30 to 90 days for the buyers to complete their due diligence, the seller can assist in expediting this process by preparing documentation ahead of time and maintaining close contact and communication.

After completing diligence and receiving transaction approval, the buyer and seller can execute the definitive agreement and close the transaction.

After the M&A Process

Now that the transaction has closed, the combined company will begin integration. These conversations should start before closing and both parties should have an understanding and be in agreement about what, if any, changes will be made post-close. The conversations will continue for months or years, and cover topics such as roles and compensation, facilities, systems, branding, and many others. 

Communication and planning are essential to ensuring a successful integration. It is important to develop trust early in the process and work collaboratively to minimize the potential for negative impact on employees, customers, and/or stakeholders.

Choosing the Right M&A Advisory Services for You

Partnering with the right mergers and acquisitions firm can be crucial to the success of a sale, ensuring you are receiving the value you deserve for your business. By working with Persient, an M&A expert in Southern California, you’ll be able to reach a multitude of buyers globally.

Sellers know they’ve built a valuable company, but they often struggle to compile the necessary information and explain their value proposition to buyers. The M&A advisory services at Persient ensure your story is told, beyond just the financials. M&A is more than a numbers game. We bring focus to the synergistic and intangible values of your company because your company is worth more than just the cash flow. We are based in La Jolla, San Diego, but serve clients across Southern California and nationwide.

If you want to understand the best ways to sell your business, download our guide or start with a M&A consult with Ashish Jariwala.

Investment banking services and securities offered through Independent Investment Bankers Corp., a registered broker-dealer, Member FINRA / SIPC. Persient LLC and Independent Investment Bankers Corp. are not affiliated entities. FINRA Broker Check. 

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