There’s no denying that M&A is a great way for businesses of all sizes across the world to accelerate their growth. The process of acquisition is fraught by potential pitfalls, which could cause acquired businesses to lose their value. Making sure you follow these four steps to an effective acquisition will help you avoid common pitfalls and ultimately make your next acquisition a winning strategy to grow.
1. Develop an acquisition plan.
One of the primary causes of failed acquisitions is poor planning. By creating an acquisition plan in the beginning, you can ensure that your company is maximizing the value of its acquisition and keeping in line with the objectives of your M&A strategy.
Typically, this means establishing a list of M&A companies to be considered and narrowing the list with the use of search criteria. These could include industry sector and deal value, market share, and operational scale. Corporate development teams have access to many sources to identify M&A target companies, including online sources like DealRoom and LinkedIn trade journals, industry associations and databases of investment firms as well as private equity companies.
2. Set up a team that will manage the M&A process.
It’s crucial for management teams to create an organization headed by a senior executive that can supervise the M&A process from start to the end. This is essential to ensure that the goal of the acquisition won’t be lost along the way and that the process of integration is seamless. It’s also essential to have experts in human capital on the M&A team to estimate the costs of compensation and benefits, as well as quantify the actuarial estimations of pension and other financial liabilities.