How To Handle Mergers & Acquisitions As A Business: A Case Study
The phase Merger and Acquisitions (M&A) refers to the consolidation of multiple business entities through a series of financial transactions.
In the business world, companies always compete against each other to stay at the top. Even if every business does their best to survive the market, only a few businesses fully succeed, while some hold on to whatever opportunity they get to survive. One such opportunity is Merger and Acquisition.
M&As are multi-step processes; the process can be shortened depending on the size and the complexity of the financial transaction. To understand more about the M&A, visit BSA Ahmad Bin Hezeem & Associates LLP.
How Should Businesses Handle Mergers & Acquisitions?
Mergers and Acquisitions go through a complex process. The complex process can be divided into the following steps.
Step 1: Developing A Strategy
The M&A process starts with developing a strategy. The strategy is formed after taking all the factors into consideration. The businesses find the motivation behind the merger and acquisition process. The type of amount they are willing to spend depends on the type of transaction they want to do.
Step 2: Identifying Targets
After the businesses have developed a merger and acquisition strategy, they now need to find potential targets that fit your criteria. You can filter out the list and start contacting them, showing your interest in merging with them.
Remember, this is not the phase where you seal the deal with other targets. Instead, this phase mainly focuses on gathering more information to see the level of interest they have in your offer and whether the deal will be profitable.
Step 3: Exchanging Information
After the first communication, if the interests intersect with each other, you and your target can move to the next level. This phase of the process deals with the documentation process. In addition, it includes the submission of a Letter Of Intent to officially show an interest in the offer.
Once the process is complete, your business and the other entity can exchange sensitive information like the financial flows of the business and the company’s history.
Step 4: Assessment Of The Target
The process doesn’t end here. After receiving all the documents and necessary information from the other party, you need to assess everything to ensure its authenticity. Then, the businesses will take all the factors into consideration and come with a price offered in the form of shares. After that, both the entities will try to reach a conclusion to move forward with the Merger and Acquisitions.
Step 5: Negotiation Process
After the business completes its evaluation of the Merger and Acquisition, they submit an offer to the shareholder in the market. This offer could be in the form of cash or stocks. The entities can discuss the price and negotiate the price of the shares.
This phase of the Merger and Acquisition process takes a long time to complete because neither party wants to give up on the upper hand. The other common occurrence during this phase of the process is that if there is more than one entity interested in merging with your business, competition among the other entities over the price begins.
Step 6: Purchase Agreements
After the entity has accepted the offer, the business starts due diligence of the target entity. The process of due diligence consists of a thorough review of every aspect of the target entity. This includes all the products, services, customer database, financial books, etc.
This process aims to ensure there are no discrepancies in the information that has been provided. If discrepancies are found, the deal can be broken or lead to a bid revision.
Step 7: Deal Closure
Assuming that everything has gone well, both parties can start drafting final agreement documents. These documents will outline stocks that will be given to the shareholders. After going through the documents, both parties can finally sign the document finalizing the deal.
Merger and Acquisition transactions happen regularly. Sometimes these transactions are friendly and can sometimes become hostile. M&A is the process that helps both companies grow in the same industry and expand their businesses. The process of M&A can be complex, but if the transaction process is simple, the process can be shortened.
As we have already said that the M&A process can be complex at times, to ensure everything breeze through smoothly, hiring a business lawyer might be the right choice. A business lawyer is well versed in commercial laws and will help you gude through all the straights and curves business’s legal pathways.