M&A is a potent method for companies to expand. The process of acquiring a business is fraught by potential pitfalls, which could result in acquired businesses losing their value. By following these four steps, you can help you avoid common mistakes in acquisitions and make your next acquisition an efficient strategy to grow.
1. Make a plan for your purchases.
Poor planning is one of the main reasons for failed acquisitions. By creating an acquisition plan prior to the start of your acquisition you can ensure that your company is maximizing value and staying in line with the objectives of your M&A strategy.
This involves creating a list M&A targets, and then narrowing the list by using search criteria. These could include factors like the industry sector size, deal size and market share, as well as operational scale. Corporate development teams can make use of different sources to identify M&A potential targets, such as online sources like DealRoom and LinkedIn trade journals, trade publications and industry associations, as well as databases of investment banks as well as private equity firms.
2. Create a team who will be in charge of the M&A Process.
It’s important that management teams establish a team led by a senior executive who can supervise the M&A process from beginning to the end. This is essential to ensure that the goal of the acquisition doesn’t get lost in the process and that the process of integration is seamless. It is also vital to have experts in human capital on the M&A team to calculate compensation and benefits expenses, and also quantify the actuarial cost of pensions and other financial liabilities.
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