The world of business is a complex one, and business deals are typically not simple. When one company is sold or decided for a joint venture with another, there are scores of documents — legal, financial and otherwise — to wrangle. Keeping the process flowing and avoiding roadblocks is key to getting the deal done by the stated deadline. Needless to say, legal and financial issues have a way of slowing down the process, but if you use tried-and-true strategies, things will most likely go along more smoothly than if you just wing it.
What Is Merger and Acquisition Strategy?
Many people question “what is merger and acquisition strategy” but what really is it? Mergers and acquisitions (M&As) are legal and financial transactions in a scenario when two companies merge or, in an ownership shift, one company acquires the other. For a successful M&A transaction, both parties have to adhere to a set of legal regulations, as well as some financial steps.
The endgame for an M&A is to grow value — the acquired company (also known as the target company) adds value to the buyer (also known as the acquirer). In addition to clear-cut M&As, there are other, less common types of mergers and acquisitions, including acquisitions of assets, tender offers and management acquisitions.
Standards for Merger & Acquisition Strategies
1. Conducting Due Diligence
Due diligence is a broad term, but one that is directly related to the M&A process. It is performing a deep dive on the target company, pretty much exploring every corner of the business. In short, it’s a method to analyze and mitigate risk from a financial point of view. It involves analyzing the company’s financials and other data: company information, intellectual property, employees and management, tech stack, legal issues, and much more. In short, it’s kind of a background check for a company.
2. Defining the Roles and Responsibilities
Another key for M&A strategy, this includes knowing what roles each player is responsible for. For example, the CEO will be the decision-maker, the CFO will be responsible for the financial details and the chief counsel will handle legal issues. In addition to these employees, there are often nonemployee consultants working on the M&A deal; these include bankers and financial and legal consultants, as well as others, such as tech experts, if the situation calls for it. Confirming that these roles are defined is key; it avoids redundancy or gaps in the process.
3. Managing Expectations
A clear understanding is necessary of how exactly things will run after the process is complete and the M&A team has disbanded. Having these expectations defined in advance will help the new organization run more efficiently from the word “go.” Once the new normal of the merged companies is moving along, processes (such as IT, data and infrastructure) need to achieve at least the same efficiency as before the merger.
4. Centralizing Documentation
In a merger, there are plenty of moving parts, and timelines and deadlines are constantly changing, so sometimes it’s trying to hit a moving target. Having a central storage location for all the documentation involved — and trust me, there are a lot of documents required for any M&A — is a key tactic to keep the process moving along.
5. A Basic Tool for M&A’s Transaction
One of the absolutely critical components of any M&A is a virtual data room (VDR), an online location where all the players involved in the process can store, search, share and edit (with the appropriate credentials, of course) the documents involved in the M&A deal.
Where Caplinked Helps the Process
Caplinked, a leader in the VDR space, provides users in multiple industries with secure virtual data rooms for all types of business transactions. Caplinked data rooms are full of cutting-edge features, including document and version management, high-level admin controls, 24/7 customer service, encryption and multiple layers of security.
In addition, they feature a user-friendly interface that is compatible with virtually every OS, and because of that, they give users the ability to upload and download documents from virtually any type of computer, tablet or smartphone. Click here to learn more about how Caplinked can help your M&A and to begin a free trial to help smooth out your M&A process.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer-products industries.