Important considerations before an M&A deal

BLOG November 15, 2015 - Petri Ojala

Important considerations before an M&A deal

Is the open transaction really fitting and does it support the strategic vision of the company and its owners? A well-implemented M&A deal or an insightful financial arrangement will not be successful if the transaction isn’t the appropriate one for executing the company’s strategy. Here are five important considerations that need to be made before pursuing an M&A deal.

 

  1. Have an M&A plan
    Interesting M&A projects can appear suddenly and companies need to be able to react upon them swiftly. A company must have a carefully thought-out strategy so that the suitability of the given project can be analyzed quickly. A company must also be prepared for the implementation of the M&A project by having good contacts with financiers and a straightforward decision-making process.
  2. Commit to the project
    Both the internal and counterparty decision-makers must be committed to the project at an early stage of the process. Otherwise, the decisions required for the project might not be made at all and the project can be delayed or even remain unfinished.
  3. Establish boundary conditions
    The boundary conditions of the project, such as its size, organizational structure, whether it is a takeover or an exit, and the availability of financing, need to be understood during the early stages of the project. A company shouldn’t invest time, money and other resources into a project that is not within the scope of its boundary conditions.
  4. Identify potential challenges
    The potential challenges and problem areas of the project should also be identified at the beginning of the process. It is important to analyze and resolve these issues beforehand so that they do not interfere with the transaction. The least problematic issues identified can be solved during the transaction process, however, control over these issues must be contained. The potential challenges can include, for example, the transfer of contracts and responsibilities between stakeholders, the reliability of financial and other information, and the future prospects of the business.
  5. Determine the project’s scope
    Lastly, it is important to determine the scope of the process materials keeping in mind the project’s requirements. If, during the sales process, it is decided to approach only industrial businesses, the process materials can be somewhat lighter in terms of content. However, if there are private equity investors or foreign operators in mind, it is important to create the process materials in such a way that they will be as easy as possible to analyze and evaluate.
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