There is no doubt that M&A is a viable method for businesses of all sizes across the globe to accelerate their growth. The acquisition process is fraught by potential pitfalls, which could result in acquired businesses losing their value. Following these four steps can help you avoid common pitfalls in acquisitions and make your next purchase an efficient strategy for growth.
1. Plan your purchases.
One of the primary causes of failed acquisitions is poor planning. If you develop an acquisition strategy from the beginning it will ensure that your business is maximizing value and staying on track with the objectives of your M&A strategy.
Typically, this involves establishing the list of M&A companies to be considered and narrowing the list with the use of search criteria. These criteria could include sector of the industry, deal value, market share and operational scale. Corporate development teams can make use of various sources to identify M&A target companies, including online sources such as DealRoom and LinkedIn trade publications and industry associations, as well as databases of investment firms as well as private equity companies.
2. Create a team to oversee the M&A process.
It is crucial that management teams create the team under the direction of an executive in the top position who will oversee the M&A from start to finish. This is critical to ensure that the purpose of the acquisition is not lost along the way and that the integration process is smooth and efficient. It’s also essential to have experts in human capital on the M&A team to calculate compensation and benefits expenses, and also quantify the actuarial value of pensions and other financial liabilities.
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