What are the 3 stages of mergers and acquisitions?

Mergers and Acquisition Process: -

When an organization is merged or acquired with another organization, it enhances the company's competitive position in the market and financial position. Mergers and acquisitions offer various benefits such as improved business relationships, diversification of products and services, Private Equity, and increased capacity at a lower cost.

In this article, you'll the process of mergers and acquisitions both on the buy side and the sell side:-

Steps on the sell side 

Stage 1 - Prepare for the sale: -

Define the strategy- You must know the goals when entering a potential sale. The management team, in collaboration with outside counsel, should establish the goals of the sale and find potential buyers. Allow the financial and market decisions made by your organization to influence your approach.

Compile the material- Make a comprehensive kit that formally represents your company to potential buyers. In case you are working with Investment bankers, then they'll prepare CIM (confidential information memorandum. 

It's a 50-plus-page document that includes the company's financials, market position, and products and services. You can use CIM to create an executive marketing plan to present to a potential buyer.

Phase 2: - Hold bidding rounds: -

Make contact with buyers - This can be done in one of two ways- either the buyer contacts you or you contact them. You need to be strategic while approaching the potential buyer, it is obvious, that you want to be in contact with more potential buyers but choose your buyer wisely.

Receive starting bids - Once you have made contact with the potential buyers and they have reviewed your material, you'll start receiving bids. 

Set a meeting with interested bidders- Conduct management meetings with interested bidders to learn more about the company's needs, intents, and proposed offerings. 

Receive the LOI- Interested bidders will send you a letter of intent which includes their interest in pursuing a merger or acquisition and deliver a summary of the proposed deal. 

PHASE 3:- Negotiate: -

Negotiate with the buyers who had to submit the bids- Once you receive the bids from the interested companies, start negotiating by referring to the intent you laid out at the start of the process. Make sure you have the important Financial information to decide the deal. 

Draft the definitive agreement- Buyers work with sellers for drafting a final deal.  

Enter into an exclusivity agreement- Now you have finalized your deal with the buyer, further you can't negotiate as you have entered the exclusive agreement.  

Help facilitate buyer's due diligence- The buyer's due diligence evaluations could take more than two months to complete. You can assist the buyer in completing the procedure as a seller. Organize the documents beforehand and stay in touch with the buyer throughout the process to avoid issues. 

Get final board approval- When due diligence has been completed and the buyer intends to move forward with final board approval.

Sign the agreement- Once the final agreement is signed, the deal is closed.

Steps on the buy side: -

Design and acquisition strategy- The first thing a buyer needs to plan is- how they want to pursue their acquisition. Describe how the company can be benefiting the buyer after the purchase- considering current market scenarios, your financial position, and future projects.

Set M&A search criteria- Once the M&A goals are defined, make a profile including - company size, financial position, products and services, customer base, and other factors applicable to the buyer's position. 

These factors are assessed during the valuation and due diligence phases; nevertheless, it is recommended that the criteria be formulated from the beginning to avoid suboptimal outcomes.

Search for potential target companies- Start searching for ideal companies once the criteria are decided. At this stage, you should be able to do a detailed valuation of target companies with all the information available.

Start acquisition planning- Now at this stage, you need to contact potential prospects. As a buyer, a Letter of Intent should be sent, which includes: a summary of the proposed deal, and interest in pursuing a merger or acquisition. 

Perform Valuation- This is one of the essential steps in the whole process. The acquired company provides all the information- financials both as a stand-alone company and as a potential merger or acquisition. 

Negotiate and sign the deal- At this stage, you need to take the final decision to pursue the deal or not and present the deal to the target companies.

Perform due diligence- In M&A due diligence refers to the evaluation you perform to ensure every detail before finalizing the transaction. 

Create Purchase and sale contracts- At this stage, the final sales and purchase contract is written with the type of purchase agreement. The contract is closed once the assigning authorities sign the contract.  

Create the final financing strategy- At this stage, financial analysis and strategies are already created, still, adjustments at made at the time when the final purchase and sale contract is signed. 

Begin Integration - Once the deal is finalized, the process of integration of both the firms is started. This entails planning on all levels, including organizational structure, roles and responsibilities, money, culture, and so on. This process should continue for months or even years to monitor and evaluate. 

This is all about M&A process, if you have any queries related to the procedure look no further mail us at info@valuqocapital.com.