The M&A market is a dynamic one. The motives and structures of deals can change from year-to-year, but one thing is constant the amount of effort required to complete an acquisition. The most time-consuming aspects of the process include valuation and due diligence.
M&A can make companies more resilient and better able to withstand difficult times. A combined business is likely to weather global market shifts better than a singular company. Banks, for instance utilize M&A to safeguard their balance sheets of their companies by buying out struggling competitors such as Merrill Lynch.
Additionally, M&A enables companies to achieve economies of scope through expanding their product line. For instance, a tech company could buy a platform company to increase the number of products and services it offers its customers. This can increase customer satisfaction and, in turn, increase the company’s financial performance.
The M&A starts with a discussion at a high level between the buyer and seller, to determine how their values align and look at synergies. The due diligence phase comprises financial models, operational analyses, and a cultural fit evaluation. Due diligence is an extensive process. Therefore, the timeline in the letter of intent (LOI) should be taken into account when planning this task. Due diligence includes conducting searches. These include UCCs and fixture filings, as along with federal and state tax lien searches lawsuits, judgment liens, and bankruptcy searches.