M&A is a potent method to help companies grow. However, the process of acquisition is full of potential pitfalls that could cause acquired businesses to lose their value. By following these four steps, you can help you avoid common mistakes in acquisitions and make your next purchase an efficient strategy for growth.
1. Make sure you plan your purchases.
Poor planning is one of the main reasons for failed acquisitions. By creating an acquisition plan at the outset it will ensure that your company is making the most of its the value of its acquisition and keeping in line with the goals of your M&A strategy.
Typically, this involves establishing an initial list of M&A target companies and then reducing that list with the use of search criteria. These may include industry sector size, deal value, market share, and operational scale. Corporate development teams can make use of numerous resources to identify M&A potential companies, which include online sources like DealRoom and LinkedIn; trade journals, industry associations and databases of investment firms as well as private equity companies.
2. Establish a team that will take charge of the M&A Process.
It is crucial that management teams establish the team that is led by a top executive who is able to supervise the M&A process from start to the end. This is essential to ensure that the strategic goal behind the acquisition does not get lost, and that the integration process runs smoothly. It is also essential to have experts in human resources on the M&A teams to calculate benefits and compensation costs and calculate actuarial estimates of financial liabilities and pensions.
