A mergers and acquisitions (M&A) deal is by far one of the most impactful moves a business owner may ever make over the course of a career. So it’s critical to understand how a business acquisition works, what steps to take—and when to seek the right advice. That’s why we’re here, and you can email us now to get started.

One of the most critical advantages you can have in an M&A deal is thoroughly understanding the other party’s perspective. Understand that the business you are trying to merge with has its own standards, technologies and workplace culture. How will it blend best with yours, to help ensure success?

Seven typical steps in an M&A process:

  1. Make the initial contact: Compile a list of businesses that are suitable buyers or sellers, and then make contact (usually a phone call) to discuss potential opportunities. Gauge the interest level, and then manage the relationship accordingly. Another way is to send the buyer an executive summary, often anonymously, to stimulate interest in knowing more about the seller. The executive summary may include information such as the product, customers and issues the company deals with, plus some high-level financial information.

  1. Sign a Confidentiality Agreement: This agreement states that the buyer and seller will keep all materials and discussions confidential.

  1. Create a Confidential Information Memorandum (CIM): This is the seller’s ‘bible,’ including all of the information that the buyer needs to make an offer (company history, financial information, product descriptions, customer information and other critical data).

  1. Submit an Offer of Interest (IOI): This general includes only a valuation range, not a specific offer price.

  1. Submit a Letter of Intent (LOI): After buyer and seller meet to discuss the IOI, the CIM and the compatibility of the two companies, the buyer offers a firm price via the LOI

  1. Conduct due diligence: The buyer reviews the seller’s financial information to confirm the seller’s claims.

  1. Create the Purchase Agreement and close the deal: The legally binding contract is created, money exchanges hands and the buyer takes control of the seller’s company. Typically, buyer and seller continue to work together after closing to make any necessary financial and/or operational adjustments to help ensure a smoother transition.

Ready to learn more about mergers and acquisitions? Email us here.