10 Step M&A Framework

"While a successful outcome is never guaranteed, having a structured process improves your odds." – Gautam Bazaz. (Yes, I made that up! At least, I think I did.)

Mergers & Acquisitions, like any activity, is a journey with many milestones along the way.?While some deals get struck over an evening of drinks, others are highly structured banker-led transactions, I’ve summarized what I believe is a simple 10-step framework for M&A.?Which, can also apply to strategic partnerships.?

1. Acquisition Strategy. The most important step! Why do you want to buy a business? What is lacking in your current offering, what market opportunity are you seeing that it will be easier to seize on a buy vs. build, what ability enables you to run a similar business more efficiently if you owned it? Be super clear about what is driving the desire to purchase.?
2. M&A Search Checklist. Now that you have defined why you want to be a buyer, what characteristics of a business are you seeking to buy? What's the enterprise value you are comfortable absorbing? What's the profitability profile? How much ongoing working capital will be needed? What are the current sales and distribution channels? What’s the tech stack??What is the key customer profile??Make a detailed enough list to filter investment opportunities quickly.
3. Target Search. Now that you are a buyer and generally know what you want to buy, activate your network. Reach out to bankers, brokers, PE / VC firms about their portfolio companies, professional service firms that work with CEOs like lawyers, accountants, etc., Attend trade fairs, events, or other activities where your industry convenes. ?Research org charts and reach out directly.?Don't be shy!
4. Acquisition Planning. Now that you have a company interested in speaking with you post-initial qualification define the process. What information do you need before the meeting to make it productive? Who will attend from the buyer's side - management and* a business unit expert who can dive in? If things move positively, what's the next step? Have an NDA ready to go, and be transparent on what information is needed so that both parties can dive deeper. Set a timeline and suggested cadence for when follow-up meetings will happen and how information will be shared.
5. Valuation Analysis. More art than science. How you value a business can be entirely up to you! Multiples like Rev, EBITDA, Free Cash Flow, completing a DCF, or some combination of metrics? The goal isn't to get to an answer, but rather what is a general valuation range that you, the buyer, think is agreeable? It might sound simple, but be fair. Most deals die at this step because buyers and sellers can't agree on a valuation framework that is fair to both parties.
6. Negotiations. Once you internally agree to a valuation range, put forth an Indication of Interest (IOI) / Letter of Intent (LOI) that lays out your high-level strategy, valuation range and framework, and other aspects of the deal – including a suggested timeline to get to the next step, detailed diligence.
7. Detailed Diligence. Now that you have a signed (hopefully exclusive) IOI / LOI, it's time to rally the internal troops. From my perspective, Corp dev is a process facilitator, not an owner. In the end, the business unit owner(s) will be responsible for integrating the acquired company and driving synergy. So, get them on board early and involved in diligence quickly; Operations, Legal, Finance, Marketing, Technology, etc.. From my experience, the best acquisition outcomes happen when all key stakeholders are brought along in the process BEFORE the purchase.
8. Purchase Agreement. Now that you have the internal team's input, and you've built an internal business model for the target and fully understand the potential opportunity set – time to make, and negotiate, a binding purchase agreement. Knowing the synergy potential before the final negotiation is critical because it allows the Corp dev team, or whoever is leading the negotiations, to understand how flexible they can be on different levers to get to a final offer.?
9. Financing Strategy. You have a signed PA; congratulations! Now time to get the deal financed. While hopefully, you've been talking to your banks, management, and board through the process, this is the part of the process where you share your future state model and get approval for cash, debt, or equity/stock swap – or whatever structure you choose. During this process, don't forget to keep the target relations warm, as final finance/legal approval can take longer than initially anticipated.
10. Closing and Integration. You made it all the way through! No easy feat; celebrate, enjoy the moment and all the hard work the various teams have done, and do something nice for yourselves. Integration, BY FAR THE MOST IMPORTANT STEP, will need an re-energized team ?? Post-merger integration (PMI) is where all the magic happens, and I'll be writing a solo post on this topic.

So there it is, 10 steps that have helped guide me through M&A, and I hope this is helpful for you too!??

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