M&A is a potent way for companies to grow. However, the process of acquisition is rife with potential pitfalls which can cause acquired companies to lose value. By following these four steps, you can help you avoid common pitfalls of acquisition, and make your next purchase an effective strategy for growth.
1. Make sure you plan your purchases.
One of the primary causes of failed acquisitions is inadequate planning. By creating an acquisition plan in the beginning you can be sure that your company is maximizing value and staying on track with the goals of your M&A strategy.
Typically, this involves establishing a list of M&A companies to be considered and narrowing the list by the use of search criteria. These may include industry sector size, deal value, market share and operational scale. Corporate development teams can make use of various resources to identify M&A potential buyers, including online sources like DealRoom and LinkedIn, trade journals and industry associations, as well as databases of investment banks and private equity firms.
2. Create a team to oversee the M&A process.
It is essential for management teams to establish the team that is led by a senior executive that will supervise the M&A process from start to the end. This is essential to ensure that the strategic goal of the acquisition is not lost along the way and that the integration process runs smoothly. It is also vital to have human capital experts on the M&A team to calculate the costs of compensation and benefits, and also quantify the actuarial value of pensions and other financial obligations.