Strategic Planning Tips and Best Practices for Successful M&A

02 April, 2020

Mergers and Acquisitions are time-sensitive transactions that come with many challenges. The processes involve aspects of corporate strategy, finance and management when it comes to the buying, selling, dividing and combining of different business entities.

A merger is the legal consolidation of two companies into one entity, and an acquisition is when one company takes over another and establishes itself as the new owner. The target company, in many cases, still exists though it is often held an independent legal entity controlled by an acquirer.

M&A’s can help enterprises increase profits in their existing markets or enable them to access new markets. Other dimensions of positive value creation can come through various forms of combinations or restructuring efforts. The focus on increasing profits is also often tied to trackable objectives, often called “synergies”, which can include both quantifiable metrics such as contribution margin and also qualitative/subjective dimensions such as brand improvement or staff receptiveness.

Some recommended considerations for entering into an M&A process are highlighted below.

Define Outcomes

The process of merging companies must address several key attributes which should be measured to determine the outcome of each. This includes what defines “success” in the merger, how the newly combined entity will generate incremental business value beyond the sum of the previously independent entities, and how the new company will be integrated during the post-merger phase. Success in an M&A transaction ultimately manifests itself in increased shareholder value.

Keep Your Core Business A Priority (Don’t Dilute Your Strategy)

Once the merger & acquisition process has begun, it’s easy to get caught up in every specific transaction detail. The acquirer should emphasize adherence to its mission while also investing appropriate financial and management resources in pursuit of a successful transaction outcome. The goals of both the acquiring and target companies are important and should be understood by stakeholders as early in the process as possible/appropriate.

Structured Planning

The planning process allows the acquiring company to thoroughly complete due diligence on the target asset, while at the same time assuring that areas of potential risk are recognized and evaluated. For mergers and acquisitions, as well as any high-value asset based business transaction, well-defined planning of the process is very important if you want to prevent any hiccups or worse, failures. All dimensions of the transaction should be address such as regulatory, unions, pay scales, benefit plans, core technology, sales & marketing, information systems, strategic incongruence, as well as any legal or financial implications related to the merger or acquisition.

Maintain Confidentiality and Motivation

The majority of employees won’t likely be aware of the M&A process until a definitive agreement is consummated and announced. While you maintain confidentiality while the transaction is in process, it’s also important to develop a retention plan that spans both sides of the transaction. Once the transaction is complete, be sure that there is a communication plan in place to ensure a smooth integration process. The communications plan is designed to make sure that people stay motivated on both sides of the deal.

Wrap Up

There are many factors that come into play when carrying out mergers and acquisitions. In this article, we mentioned strategic planning tips and best practices for organizations to ensure successful M&As.

Speak with our experts to know how ShareVault drives successful M&As by facilitating users with seamless due diligence solutions.