M&A is a powerful method for companies to expand. The process of acquiring a business is fraught with potential pitfalls that can result in acquired businesses losing their value. Following these four steps can help you avoid common acquisition pitfalls and make your next purchase an effective strategy for growth.
1. Plan your acquisitions.
Poor planning is one of the main reasons for failed acquisitions. If you create an acquisition plan from the beginning, you will ensure that your company is maximizing its value and remains on the right path to achieve your M&A goals.
Typically, this involves creating a list of M&A companies to be considered and narrowing the list with the use of search criteria. These could include factors like the industry sector, deal size, market share and operational scale. Corporate development teams can make use of diverse resources to pinpoint M&A potential targets, including online sources like DealRoom and LinkedIn trade journals, trade magazines and industry associations, and databases of investment banks and private equity companies.
2. Create a team who will take charge of the M&A Process.
It is crucial for management teams to establish a team led by a top executive who is able to oversee the M&A process from beginning to the end. This is essential to ensure that the strategic goal behind the acquisition does not get lost, and that the integration process goes without a hitch. It’s also important to have human capital experts on the M&A team to estimate the cost of benefits and dataroomplace.blog/which-process-can-be-accomplished-with-due-diligence-data-rooms/ compensation and to quantify actuarial estimates of pension and other financial obligations.