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Learn valuable lessons that can be applied to your practice. About DealRoom. Book a demo Log in. DealRoom office hours with halo and paylocity. Marsha Lewis. Director of Marketing at DealRoom. We don't plan on doing many more of these, if any at all. The steps which follow can be seen as a brief guide for acquiring a company. All Notes. Enhance your buy-side diligence with DealRoom! Make sure a target will truly add value to your business with our buy-side diligence template. Obtain the right documents to get a clear valuation of the business and its role in expanding your market reach.
This will require a deep evaluation of its own business as well. It will perform an analysis of its industry, who are its competitors, what are the barriers to further growth, the manner in which the supply chain operates, and many other factors. The firm will need to assess its strengths and weaknesses to determine where the gaps in its operations are and how these gaps can be filled by an acquisition. In assessing these areas, an acquiring firm will be able to determine what it needs from a merger: increased revenues, cost reductions, market dominance, technology improvements, or any other beneficial synergies.
Once an acquiring company determines its need for a merger, searches for target companies, decides on a company that will be a good fit, and values that company, the entire merger process officially starts with an offer made by one company to another. Both companies will usually be involved in closed-door discussions about the proposed merger, and agreements may be made after the first offer but usually negotiations will involve several offers and continued discussions that may last for months.
Once the offer has been accepted, the due diligence period begins. This is a long and detailed process whereby the acquiring company analyzes every aspect of the target firm. This covers all financial aspects, from balance sheets to ratios, employees, customers, supply chains, market share , operational procedures, and more.
This study of the target company helps the acquirer confirm or adjust the value of the target company and discover any potential problems with the business it is acquiring.
Once an agreement between two companies is reached, and the due diligence finalized, both companies will decide on the final type of sale. The companies will determine if a sale will be made through the purchase of assets or through the purchase of stock.
The acquirer will then finalize its financing arrangement for the purchase. The final details of a merger proposal are specified in corporate communications and distributed to the shareholders of both companies. Assuming the required votes are obtained from both sides, the merger then moves to the regulatory approval phase. In many cases, amiable merger offers usually move somewhat quickly through the corporate communication phase but may be slowed for months or years in the regulatory approval phase.
The more countries of operation the longer and more tedious this process can be. Domestically in the U. In some cases, companies may be required to integrate certain provisions mandated by the government before approval can be achieved. This can include divestitures in certain areas of combined businesses where monopolistic attributes may be identified to abide by antitrust laws. In general, synergies are typically expected from a corporate merger which results from the combination of key business areas and the reduction of costs.
These combinations and synergies are what create the greatest need for corporate analysis and deep due diligence. The different variables involved in each individual merger scenario are also the driving factors in the total amount of time it takes for a merger to be completed from introduction to final comprehensive approval. Market estimates place a merger's timeframe for completion between six months to several years.
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