Mergers and Acquisitions are a process that involves the coming together of two or more organizations to achieve a common goal. This type of cooperation is widespread in today’s world, although it is a complex and time-consuming process. An M&A transaction has many steps and nuances that include due diligence, closing, and implementation. In this article, we’ll talk about the steps on the seller’s and buyer’s side that they must follow to complete the transaction.
Steps to M&A on the seller’s side
So, the steps that a seller in a merger and acquisition transaction must follow include the following:
- Prepare for the sale
Develop a strategy and be clear: Why do you want to sell your business? Seek out, potential buyers. After that, it’s worth doing all the necessary confidential documents for due diligence. To do this, they need to prepare a special document that details their financials, market share, and transaction book. This document is called a CIM (Confidential Information Memorandum) and it is developed with the help of investment bankers.
- Holding Bidding Rounds
This step involves reaching out to potential buyers. Sellers must show their interest in the deal and their willingness to sell, as well as answer all questions of interest in detail. The seller should also take care to create a document in the form of a teaser that summarizes all the information about the bids. When the seller begins to receive the first offers of cooperation, after initial contact with each of them, analyze all offers from buyers. Who has responded and set up appointments for them for a similar interpretation? And once the seller has finalized his choice of partner, he forms and sends him a letter of intent outlining an overview of the proposed deal.
Advise the experts on the transaction’s vitality, and then make an exclusivity agreement whereby the vendor has no right to solicit the others’ interest until the deal is completed or frozen. Next, you need to bring the purchaser in for due diligence, and if all is well, you prepare a final draft of the agreement. Next, you need to get committee endorsement, after which the deal closes and the integration process begins.
Steps in a merger and acquisition on the buyer’s side
The buyer in turn must follow the following steps:
- Develop an acquisition strategy – They also need a reason to start the procedure of M&A. To enhance their financial situation, to expand their respective market segments, etc.
- To search for potential partners you should set your criteria, this way the search will be noticeably narrower, and you will save time by constantly checking the candidates against the existing factors
- Create a list of potential partners and contact them through a letter of intent. This way you’ll express a brief overview of how the proposed deal works
- Go to the evaluation – During this process, the buyer should form several business models to evaluate the seller’s financial performance
- Start Due Diligence -Detail the company’s confidential information to form an overall assessment and better understand the big picture. Today’s due diligence process is not without the use of a virtual data room. It greatly simplifies life for both buyers and sellers by providing a convenient and secure place for remote data analysis
- During the negotiation, the buyer should form his price offer and offer it to the seller
- Figure a financing strategy – this can either be done with cash reserves, stocks, debt, exchanges, or a combination of these options
- Sign the closing of the transaction and move forward with post-merger integration