Mergers and Acquisition transactions aren’t as of a cakewalk as it seems to be. Both buyer and seller sides have to go through a process involving lots of documentation and due diligence before finalizing the transactions. One of the toughest parts is doing things legally and keep business concerns in check.
The diligence team plays an important role in any M&A transaction. They dig deeper into the information that is needed and into the information that is received. They not only look for the legal side of the deal but was looking are the risks that can impact the transaction. It is difficult sometimes with other responsibilities of the team but equally important as it will ensure the person whether to get involved in the transaction in the first place. They try to avoid leaving as many hidden issues as possible and not kick the can to post-closing.
The team needs to remain subtle during the entire process. They have to deal with the issues that the size of a molehill to that which might seem as big as mountain keeping senior leadership into the loop without creating a panic that might occur.
Amidst the pool of risk, it is important to recognize with one requires most and first attention. Most of the risks are usually the typical risks that are expected during the M&A transaction but some might be a surprise depending on the type of transaction. In such a situation you need to use the method of hypothesis where you can check that is there any value-adding factors in the deal. If yes, what are those and how much they will drive the value? But time is precious and it needs to be done before it is too late. Once that step is clear, a deeper dig is required to find out the hidden costs or terms in the deal. After the issue is clear, addressing it to the concerned person is an art the team should be good at. Finding the solutions that help take the deal forward without any lagging doubts is the seller’s prime concern.
The internal part of the company like the culture and environment can also be of great concern during an M&A transaction. The top management tends to forget about it during the deal but it can be really important from the buyer’s perspective to have a team that will be able to deal with the changed or modified management and conditions. Sometimes, even if the company culture or environment is not known, things like this can be gauged just by knowing the industry the company belongs to as some traits are industry-specific.
The legal team onboard also plays an important role in managing legal stuff. The lawyers involved should be with a business-oriented mindset along with being legally sound enough to keep the things moving with everyone’s agreement. A counsel that keeps things in perspective is highly preferred. They don’t take a legal risk and put the success of the transaction at stake. Even though there are people on the transaction that only come around at certain points in the deal, treating these things holistically and making strong knots to tie things together is important.
Considering integration complexity at the time of target identification is something that’s not much acknowledged and one of the easiest ways to enhance your probability of being successful with what you are trying to achieve. Integration brings clarity in defining and shaping goals.
In other countries, the complexity might differ but aren’t absent. There’s enough cultural diversity in the United States alone to create challenges from an integration point of view and after closing an acquisition. People tend to make wrong assumptions that because targets are located in the UK things will be easier because you share the common language.
As alluded before, considering the culture of the target company is highly important. The employees are the driving force of any organization. Altering their work structure and routines might be risky. Buyer is advised to make efforts by using sources such as reaching out to firms that can connect you with those that are consulting to give advice, to potentially find a former employee who is willing to share their experience with the culture. Of course, the team involved in the transaction is going to help gather information.
A strong corporate development team that has an understanding of filtering their internal team, take what they saw on-site, and add those two, can provide a much better overall picture of the culture or at least where the potential hotspots or opportunities for improvement are.
Success in an M&A transaction is proving that value drivers exist and that they execute on post-closing. Things are lined up in the first 2 quarters and things are moving along as you planned, that the value capture is happening and the synergies are appropriate to a deal or above the initial hypothesis and that you can achieve revenue synergies.
Evaluating the synergies using scorecards is one way to quickly assimilate information, raise issues, and get the team to solve them or allocate resources, time, and money to that problem to get it solved quickly, so it’s less of an interruption. There will always be some issues, so if things are unplanned and if a scorecard doesn’t exist, dealing with those can be a problem going forward.
M&A is a very complex process and the integration, the most important part of M&A is very challenging and you need all hands on deck, and you everybody inside your organization helping to solve the inevitable things that pop up.