Mergers and acquisitions (M&A) advisors work with CEOs and business owners to accelerate growth by making strategic, opportunistic acquisitions. An M&A advisor with decades of experience will guide you through every step of the acquisition process.
For small and middle-market companies, finding a great acquisition target to accelerate your growth takes focus, commitment and expertise. Finding great acquisition targets also requires a disciplined approach, experience, time and finesse.
A proactive acquisition process can have a high probability of success. Given some acquisitions are not successful long term, we will define success with respect to acquisitions as both, A) Deal closure at a reasonable price/terms, and B) Achievement of effective post-acquisition integration and synergies that are realized by both the buyer and seller.
Implementing a Strategic Acquisition Process
Strategic acquisitions to accelerate growth or fill critical gaps in a business are doable by most any company given the right advisory team in place, which consists of an M&A advisor, corporate/transaction attorney and a CPA/tax advisor.
Most small and mid-size companies that pursue acquisitions on their own miss real opportunities due to a lack of a process and experience. Most companies also tend to overpay so a defined, disciplined process with a seasoned M&A advisor is extremely important.
Here are the most important steps to a successful acquisition strategy:
- Define your acquisition strategy in writing
- Define your investment criteria and budget
- Define the source of funds to complete the acquisition
- Build the acquisition target list
- Begin target outreach to potential sellers
- Gather information on interested sellers
- Secure conference calls and meetings with potential sellers
- Gain additional information in order to provide a Letter of Intent
- Negotiate and finalize the Letter of Intent (LOI)
- Secure the funds needed to close
- Perform Due Diligence and renegotiate the LOI, as needed
- Draft and negotiate legal documents
- Close the transaction
- Post-acquisition integration
Focus on the Strategy
If you make the decision to focus on strategic, opportunistic acquisitions, you can greatly accelerate your growth and profits, so focusing on the strategy is a key aspect of the process. Keep in mind that there is such a thing as an acquisition that is just too small. Small acquisitions take just as long (or longer) than mid-size or large acquisitions so use your time wisely and make the appropriate acquisitions that move the needle on your growth rate and revenue.
Here are some key issues to consider:
- What is the maximum size company you are comfortable acquiring?
- What is the minimum size company you might acquire?
- Do you have a minimum profitability hurdle for the target company in mind?
- What types of synergies do you expect from acquiring a company in this industry segment?
- What products or services will be the primary focus of the acquisition?
- What geographic expansion do you want to achieve from the acquisition?
- What technologies are compatible or incompatible as part of your acquisition search?
- What management positions, if any, do you seek out from an acquisition?
- Are you interested in eliminating a competitor, while acquiring customers for growth?
- Who is on the acquisition team (internally and outside advisors) that will be involved in an acquisition?
Most critically, assemble your advisory team first, especially if you are not seasoned at making acquisitions or have limited time. Your acquisition advisory team should include an M&A advisor to initiate, manage and drive the acquisition process, a corporate/transaction attorney and a CPA/tax advisor and each plays a pivotal role.
Negotiations in acquiring a company are extremely different from any other negotiations given the seller has built the business from the ground up and is typically a once in a life-time event. With the right M&A advisor, you will feel completely comfortable pursing strategic, opportunistic acquisitions.