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Mergers & Acquisitions
Acquisition Process
The acquisition process starts with planning the process and ends with planning how to make the acquisition a success after the closing. Actually, planning acquisitions never should end. If an acquisition is not successful, it will haunt the acquiring company for many years. However, a good acquisition is certainly an avenue of growth and evolution.
Our successful approach in making an acquisition involves the following steps:
(Click on graphic for more information)
1. Assess Goals, Strengths, Weaknesses, and Marketplace |
Define the specific objectives of acquisition (acquire a company in the same line of business, purchase a product line or lines to complement current lines, raise the barriers of market entry for other would be competitor, eliminate a competitor, obtain new markets and /or new customers, be a global supplier for your major customers, etc.) | |
Asses the companys strategic position: define the business strengths and weaknesses as they relate to a growth acquisition strategy; also any constraints to execution. | |
Define the management capabilities for acquisition strategy implementation and post-acquisition integration. | |
Define financing capabilities - what is affordable. | |
Assess the marketplace to understand what the challenges and opportunities are that will affect the success of an acquisition strategy. This includes: an evaluation of the present status in the industry niches in which the business operates, projection of market dynamics for the business market niches (market size, methods of distribution, competitive pressures, regulatory restrictions, technological changes, customer needs, etc.). |
2. Define the Strategy |
Clearly articulate the strategy that will be pursued. | |
Establish the objectives for the acquisition program. | |
Establish the goals and measures for the program so that progress can be tracked. | |
Establish the criteria for individual acquisitions. |
3. Identify and Approach the Targets |
Conduct broad search for candidates (In case the targets have not been previously identified). | |
Identify targets and prioritize using criteria. | |
Call on the Approach priority to elicit interest. This is a critical step since in many cases targets are frequently called by potential buyers, their representatives and brokers. | |
At the same time respond to opportunities being offered using criteria. |
4. Evaluate a Target |
Review targets culture, products, technology, markets, competitors, finances, management, etc. | |
Evaluate the target strengths and weaknesses | |
Prepare the financial analysis (historical and projecting sales, estimating capital costs, estimating operating costs, estimating profit margins, estimating operating margins, calculating free cash flow, setting minimum Return Of Investment (ROI), calculating fair market value (FMV), evaluating risks. | |
Develop range of values. | |
Establish basis for discussions. | |
Formulate strategy for transaction. | |
Establish any financing needs. |
5. Negotiate and Complete a Transaction |
Begin negotiation. | |
Establish letter of intent. | |
Proceed negotiations. | |
Develop purchase agreement. | |
Select and coordinate the due-diligence team. | |
Conduct due diligence. | |
Negotiate final terms and agreement. | |
Complete the transaction. |
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