Acquiring businesses is a long-term venture that could take months (and even years) to fully realize. M&A is a major component of growth for companies of all sizes. While every acquisition is little different, there are some general guidelines that companies must follow to ensure that the deal has a chance of success.
1. Define the strategy.
A sound M&A strategy includes an explicit description of what you intend to accomplish by acquiring a company, including growth in revenue and client base and exposure to new types of clients. It also includes a thorough financial analysis which includes your current financial position and market projections.
2. Conduct searches
The due diligence process is a crucial step in M&A that involves checking financial documents in a double-check and conducting searches of the company to uncover tax liens, bankruptcy filings, litigation and fixture filings as well as IP. Also, you should look over the company’s social media presence, reviews, and testimonials to gain more information about its operations.
3. Be alert for red flags.
It’s tempting to look for acquisitions that “rock the world”, but it’s important to stay realistic about your goals and their alignment with your resources, and whether the culture of the target fits well with your own. Furthermore, you shouldn’t be so deal hungry that you disregard any red flags that appear in due diligence or during the integration and change management process.
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