The phases of an M&A strategy
Regardless of the type, every M&A transaction has fundamental steps.
The first one is the strategic evaluation of the project.
For example, an acquisition may be dictated by the will to grow in a high-potential market without setting up a foreign subsidiary. This makes it possible to take advantage of already existing production, distribution and financial structures without incurring the costs to develop them.
For a company aiming to penetrate new foreign markets, the purchase of an already established competitor can therefore be an effective choice.
This phase is followed by the analysis and selection of companies in line with the strategy.
The screening of potential candidates is a crucial but complex operation: companies reflecting specific criteria, defined a priori, must be identified.
These criteria can be both qualitative and quantitative.
Returning to the example of the car parts manufacturer, factors to be taken into account could be the EBITDA of the competitor to be acquired (quantitative criteria) and the type of products offered along with the certifications possessed (qualitative criteria).
The verification of all these aspects results in research that extends the timeframe of mergers and acquisitions. However, this market analysis is essential to proceed with the next steps.
One is due diligence. This is the process by which the suitability of a deal is assessed, based on the information available to the parties, in order to lay the groundwork for the subsequent deal negotiation.
During this phase, the parties agree on the details of the merger or acquisition transaction, defining instruments and modalities for guarantees, indemnification and compensation. Only afterwards will it be possible to actually conclude the agreement.
As can be guessed, all these activities are complex, but today technology can make some of them simpler. In particular, we are talking about finding the right target companies.