Acquisitions might appear like cake on paper, but to make them work over the long term requires strategic thinking and meticulous preparation. If they fail to follow tried-and true methods to prepare, execute and integrate the deal, many entrepreneurs are dissatisfied with their latest acquisition.
Establishing an acquisition plan is the first step. The most successful acquirers have well-defined, specific value creation ideas going into the deal–such as expanding to an international market or filling portfolio gaps. They also have a business partner as well as a team to perform the analysis and negotiations, and a clearly defined plan to close the deal and transition it.
Valuation and Deal Structuring
The next step is to determine the price at which the purchase should be made. This is done by comparing the valuation techniques with the financial records of the company. Consider the target’s cash flow predictability, market position, and systematization. It is also important to determine if the deal is an asset or equity deal and what tax implications.
Negotiation and Closing
Throughout the whole process, it is important to pay attention to the customer. It is also essential to avoid slicing corners during due diligence or ignoring negative findings that could have an impact on the transaction.
It is also important to have a well-trained team to guide the M&A process. This is especially important during the due diligence phase where it is easy to miss the details. Communication with employees is important. This is a stressful period for the employees of the acquired company and it is crucial to communicate clearly and in a clear manner.
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