This is a truism in any sort of transaction and specifically true in M&A. The longer a deal drags on the more likely it is either side will have second thoughts or the external environment can change. A deeper analysis reveals there are two aspects of delays which can impact a transaction – preparation and discipline
The mergers and acquisition process usually follows a well-defined path. One party is in the market, learns about an opportunity, and after a high-level review both parties agree on a general set of terms. From there, due diligence is conducted, and a purchase agreement is negotiated. This is an overly simplistic example but directionally correct. Each step of the way, however, can be delayed if the parties have not prepared accordingly. The work done before a company ever approaches the market can speed up deals dramatically. This applies to both the buy side and sell side of a deal and are very similar. For example:
Buy Side Preparation:
· Strategic clarity on the “why” behind the need for acquisition(s)
· Conceptual understanding of the post-transaction integration process
· Lining up sources of capital
· Perspective on how long they want the former management team to be engaged.
· Documented and accurate financials
· Perspective on their post-acquisition engagement
· Forming the “under the tent” team who will drive the sale process.
· Strategic clarity on their company’s value proposition and key value drivers.
Time spent aligning on these issues will help speed the process through the early stages of conversation and allow both parties to reach a decision-making point faster and with greater clarity.
At this point, deal discipline becomes paramount. Once due diligence begins it is critical to apply a project management approach to the process. This is not the “exciting” part of the process but can kill a deal just as quickly as the point above! Things to put in place early on to provide that discipline are:
· Specific team-leads for the deal
· Tracking and follow up on questions and assigned tasks
· Regular, standing meeting times to review progress
· Agreement on communication processes / data submission protocols
· Escalation points should timing fall off track.
At Capital Tactics, we don’t use a “leverage” approach – deal leaders see things all the way through the process assisted by expert staff at the right time. This ownership approach ensures continuity of vision as well as consistent execution. We see the negative impacts of not preparing and instilling the right discipline early in the process and remaining cognizant of that.
We would love review how this applies to your business in depth. You can reach me at firstname.lastname@example.org