M&A is a powerful way for companies to grow. However, the process is prone to pitfalls that can cause acquired businesses to lose value. Following these four steps can help you avoid common acquisition pitfalls, and make your next acquisition an effective strategy to grow.
1. Make sure you plan your purchases.
Inadequate planning is among the most common reasons for failure in acquisitions. By establishing an acquisition strategy from the beginning, you will ensure your company is maximizing its value and staying on the right path with your M&A goals.
This involves preparing a that site list of M&A goals and then reducing the list by using search criteria. These could include sector of the industry, deal value, market share, and operational scale. Corporate development teams can make use of various resources to identify M&A potential targets, such as online sources such as DealRoom and LinkedIn trade publications, trade journals, industry associations, and databases of investment banks as well as private equity firms.
2. Form a team to lead the M&A Process.
It is essential that management teams establish an organization headed by an executive at the top who can supervise the M&A from start to finish. This is crucial to ensure that the strategy behind the acquisition doesn’t be lost and the integration process goes smoothly. It is also crucial to have human capital experts on the M&A team to estimate compensation and benefits expenses, and to quantify the actuarial value of pensions and other financial liabilities.
