M&A is a great way for businesses to grow. However, the process of acquisition is not without risks which can cause acquired companies to lose their value. These four steps will help you avoid common pitfalls in acquisitions, and make your next acquisition an effective strategy for growth.
1. Plan your acquisitions.
Poor planning is one of the primary reasons for failing acquisitions. By creating an acquisition strategy from the beginning, you can ensure that your company is maximizing its value and remains on the right path with your M&A goals.
This involves preparing a list of M&A targets and then narrowing the list using search criteria. These may include factors like industry sector, deal size market share, deal size and operational scale. Corporate development teams can make use of various resources to identify M&A potential buyers, including online sources like DealRoom and LinkedIn trade journals, trade magazines and industry associations, as well as the databases of investment banks as well as private equity firms.
2. Establish a team that will manage the M&A Process.
It’s important that management teams establish the team that is led by a senior executive who can oversee the M&A process from start to the end. This is critical to ensure that the purpose of the acquisition isn’t lost in the process and that the process of integration is seamless. It’s also essential to have human capital experts on the M&A team to estimate the cost of benefits and compensation and to quantify the actuarial value of pensions and other financial obligations.