How To Assess Potential Acquisitions and Execute for Success

There are benefits of consistently tracking your M&A pipeline - but once you have identified possible targets, how do you begin making acquisitions?

According to an article in Harvard Business Review, an estimated 70 to 90 percent of all acquisitions fail, with most explanations pointing to integration problems between two entities. With this statistic in mind, it can be daunting for a business to begin executing its acquisition strategy.

There are, however, a number of key factors which can be used to determine the suitability of an acquisition and execute the transaction effectively. With a diverse range of M&A experience, we understand what to look for to effectively assess and execute an acquisition.

To avoid fallout when acquiring a competitor or complementary business, a buyer must, inter alia:

  1. Identify the synergies between their business and the target and how those can be used to unlock revenue post-acquisition;
  2. Understand the motivation of the seller(s);
  3. Identify key management and talent who will need to be incentivised to remain post-acquisition;
  4. Undertake comprehensive financial (including tax), commercial and legal due diligence;
  5. Determine the post-acquisition integration strategy prior to closing, including resource consolidation, product roadmap, third-party mediation, culture integration, and talent incentivisation; and
  6. Structure the acquisition such that the seller(s) are strongly disincentivised from violating restrictive covenants such as non-compete provisions.

When these key areas are not properly addressed pre-closing, they can lead to costly integration, loss of key management and talent, unidentified problems within the acquisition target, and in some cases complete acquisition fallout.

Companies should keep this framework in mind as they flesh out their M&A strategy and begin approaching targets. Moreover, if your company is new to making acquisitions, it is best to seek advice from financial and legal advisors who have experience in the space.

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