For many companies, the merger and acquisitions process is a black mysterious box. Because investment bankers use confusing language to describe what they do, business owners often feel very over matched when trying to understand the merger and acquisitions process. This process starts as a sales process, moves into a high level relationship building process, and then segues through valuation, structuring, financial analysis, business analysis and legal documentation. For each of these phases, a different skill set is required. In most instances, a business owner will not have all of these specialized skills within his company. The most efficient way to approach a Merger and Acquisition Process is to bring in an outside advisor who has experience that your company can leverage. Think of this process as being a new business development department for your company. You may already have a sales department, a R&D department and a product management department. A merger and acquisitions department will give you a way to think about growth in a completely refreshing and newfangled way. Through looking at acquisition targets and learning their strengths and weaknesses, you are better able to truly understand your own business model.
The merger and acquisitions process first starts as a sales prospecting drill. This is the stage where your advisor is generating pipeline opportunity consisting of acquisition targets from their network. Like a sales process, each lead will have a relatively low probability of close, thereby requiring a large pipeline to ensure success. Once engaged with a target, your advisor must build a relationship with them to enable them to see your company as a good company to consider selling to. This is a very important part of the process because it is when the Seller is forming views of your professionalism, capital wherewithal, level of character and cultural compatibility. A good advisor knows how to project the right image for your company, to get a seller to see your company as a preferred acquirer. Next the process moves through valuation, structuring, financial analysis and business analysis. This leads to the right price and structure for the acquisition target. It also allows you to verify that the business is healthy and poised to continue to prosper. An advisor seasoned through many years of merger and acquisitions, will lead you through this process and allow you to successfully acquire your targets.