Ever wondered how successful companies manage to expand their businesses rapidly and maximize their profits? One of the most effective ways to do this is through effective mergers and acquisitions (M&A) backed by robust feasibility study. M&A involves the consolidation of enterprises to improve business management and promote resources for effective growth. It’s like two companies coming together to form a powerful business alliance. However, the process is not as simple as it sounds. It requires careful planning, insightful communication, and exceptional organization and management skills. In this article, we’ll delve deeper into the world of mergers and acquisitions and explore why they are crucial for businesses that want to scale up quickly.
An ideal M&A study effectively falls into three formal phases, namely, feasibility study or assessment, implementation planning, and post-deal integration. Let’s talk about each step in detail:
Step 1: Feasibility assessment
The goal of this study is to propose an operational check for target business operating enterprises, allowing you to identify the problem areas that the M&A will address and achieve comprehensive improvements in business management. An M&A feasibility study is particularly important when multiple alternative solutions are available, as it helps you determine the most feasible option for your enterprise. Additionally, it’s essential to consider your company’s financial capabilities and conduct a thorough risk analysis before pursuing an M&A deal. Listed below are some of the parameters that would be wise to check while doing a feasibility study –
● Address the problem: List down the challenges that need to be addressed through the M&A
● Target cluster: Check companies that offer solutions or answer how critical business objectives will be achieved
● Check for alternatives: Understand alternative solutions available. Your options could involve redeveloping/replacing the existing system
● Identify the feasibility of each company: Check if any competitors have implemented the same strategies. Is that coming under your strength and budget (employees count, past financial, future growth strategies, customer reach, in-house development/ assembling/ outsourced capabilities, any legal case history, debt aspects, audit report, type of funding received, etc.)?
● Choose a preferred target: Choose potential companies that are most feasible for an M&A and fulfilling your criteria to perform an M&A analysis. Get details of the core management and decision makers and through legal executives get into preliminary discussions and a non-disclosure agreement.
Step 2: Implementation planning
Non-disclosure agreements should be signed before sharing more sensitive information. This ensures that prospective entities (buyer/seller/collaborators) cannot use confidential information for personal gain.
The primary reason for planning is to learn about each organization and to conduct a preliminary analysis of key aspects of an M&A. Generally, a collaboration committee is established which serves as a kind of board of directors for the collaboration/acquisition planning process to conduct a thorough investigation of an organization’s operations.
These committee members also look for financial red flags that are important for the final M&A transaction. The deal team will also need to undertake an information memorandum (a detailed document on the business that summarizes the company’s financial and business position along with its key selling messages).
Then there’s the “Data Room” procedure to consider. Within potential companies, their advisors, their potential bidders (and their advisors) can access all the documents securely and safely (physical or via the Internet if not present). This also helps the involved companies (buyers/sellers/collaborators) to verify all documentation in a structured and controlled manner. All questions are to be answered and issues are to be resolved within the Data Room before moving ahead with the final deal.
The next step involves signing the contract and closing the deal. Here’s where the companies involved will sign the final contracts and complete the transaction. Final actions need to be taken that satisfy all closing conditions and funds must be exchanged to mark the official closing of the deal.
Step 3: Post-deal integration
Once the deal is closed, the full-scale integration of the acquired company (in case of acquisition) or collaboration of companies (in case of a merger) can begin. This also involves intensive execution and evaluation of the transaction. It is advisable to make post-deal strategies while doing the “Due Diligence Process” to avoid any disputes.
How we can help
With over two decades of expertise and in-house capabilities for executing such projects, here’s how Netscribes can help:
Buyer side: We help buyers in the M&A process by identifying target companies, carefully assessing their health, and looking for any gaps in their material/process/information that could impact the deal.
Seller side: We help in the evaluation of documentation regarding all areas of their business and ensure the seller receives the maximum valuation of their company.
For collaboration: We offer support extending to all areas helping ensure each of the parties gets the maximum benefit from the collaboration. Right from future strategy planning, and marketing through analytics, to e-commerce business handling, and beyond.
Netscribes has been empowering organizations with data-driven innovation insights to navigate the market with greater speed and accuracy while staying within budget. To know how we can support you throughout an M&A feasibility analysis process, get in touch.
Based on insights by Husen Limdiwala – Manager, Market Research team, Netscribes