Five ways to streamline the M&A process

In the United States, M&A activity has trended higher in recent years, and over 90% of respondents in Deloitte's 2022 M&A Trends Survey said they expect deal volume to stay the same or increase over the next year.

The lifecycle of an M&A deal can be long, and a deal will move through a number of stages and milestones before completion. M&A deal teams often work on transactions over the course of years, and have to manage many relevant relationships and moving parts of those relationships over that entire period. 

Although merger and acquisition deal lifecycles can be lengthy, there are ways to make the process more efficient. In this guide, you’ll learn how the best investment banks simplify and streamline their M&A process to drive deals more efficiently.

What are mergers and acquisitions (M&A)?

Mergers and acquisitions are two types of deals in which two companies combine their assets. The two terms are often used interchangeably, but mergers and acquisitions are different in some important ways. 

In a merger, two companies combine to form a new company. Typically, one company is larger than the other, and the stronger company will typically absorb the purchased company. The purchased company ceases to exist. 

In an acquisition, the buyer (acquiring company) buys most or all of the seller (the target company). The acquired company might be absorbed or combined with some aspect of the acquiring company, or it may continue to operate as a standalone business under its original name.

{{ib-guide-crm="/rt-components"}}

How the M&A process works

To complete a merger or an acquisition deal, both companies (the buyer and the seller) will follow this M&A process:

1. Deciding on goals. What is the M&A strategy? Typical goals might include acquiring technology or resources, improving a product’s speed to market, increasing market share, or boosting profits. Dealmakers refer to the M&A objective as the transaction’s strategic rationale.
2. Choosing and contacting companies. In this stage, investment banks research their most appropriate target companies. While there are some patterns in characteristics of potential target companies, there is no absolute consensus among buyers over the hallmarks of a good acquisition candidate. Acquiring companies will research a target company’s profitability, liquidity, leverage, and valuation to assess its potential value.
3. Analyzing the potential target company. This stage involves an initial investigation into the finances of the selling company to evaluate the potential for a successful M&A. This step requires the target company to supply confidential and proprietary financial data.
4. Negotiating. Negotiation begins when an acquiring company has reached an approximate valuation for the purchase. This step involves working out not only the cost of the transaction, but the terms and conditions of the M&A. At the end of the negotiation, the parties prepare a letter of intent (LOI) in which the buyer and the seller state their agreed-upon terms. 
5. Conducting due diligence: The due diligence process is a vital part of M&A dealmaking. During due diligence, the acquiring company closely examines every aspect of the target company to get a clear picture of every detail of that company’s financial picture, IT strategy, intellectual property, and operations. 
6. Sealing the Deal: Assuming the due diligence process doesn’t uncover any issues, the two companies will sign a definitive agreement.
7. Integrating the companies. During this stage, the buyer and the seller work together to seamlessly integrate into one organization so they can maximize the value of the M&A. While the first 100 days of consolidation are often the most critical and intense, developing synergy between the two parts of the company is a process that can take years.

{{ib-guide-crm="/rt-components"}}

5 strategies for streamlining the M&A process

Each step of the M&A workflow includes many sub-tasks, making the process time-consuming—you can streamline the steps so you can still complete an M&A deal without cutting corners.

Here are some ways to clear roadblocks and start streamlining the M&A process:

1. Define roles and responsibilities within your M&A deal team

Understanding who is responsible for each step of the M&A process is critical. This includes defining the roles of the CFO, CEO, and any non-employee consultants, bankers, legal professionals, or financial advisors on your team that are involved in the process from the start.

Defining the roles of all players in the process helps you avoid stepping on each other's toes or dropping tasks because people aren’t clear on who’s doing what.

2. Maintain discipline during M&A deal sourcing 

Stick to target criteria that align with your strategic objectives and benchmarks for financial performance. This discipline during the M&A deal sourcing process decreases the likelihood of pursuing deals that aren’t a good fit. 

3. Confirm that information is up to date during the due diligence process

During M&A due diligence, you will be investigating intellectual property (IP), legal issues, business processes, dependencies, critical roles within the company, and much more. Confirm that all information from both sides of the transaction is up-to-date before taking action. 

A lot of this information can have legal ramifications if it is not properly handled, so both the M&A buyer and the seller will be digging deep into the documentation to find hidden issues. Making sure the information is current before this process starts can speed up the merger or acquisition. 

4. Centralize documentation and communication

Deadlines and timelines will shift during any M&A deal, so communication is critical during every phase of the process. 

All relevant policies, procedures, data, and documentation need to be accessible to teams on both the buy-side and sell-side of the transaction. The information needs to be logically organized, searchable, and securely maintained in a single location. 

5. Use technology to manage M&A transactions

The quality of your team’s relationships and your ability to quickly access data about people, companies, interactions, and transactions will determine the strength and quality of your M&A deals.

Companies that gain a competitive advantage in M&A know that deals hinge on relationship building and careful due diligence. That’s why top acquiring companies leverage M&A software technology to optimize their deal process. 

Applications can help manage all critical M&A workflow steps, including deal sourcing, project management, financial analysis, and data protection. Modern M&A pipeline management software can be a critical tool to help your deal team make sure nothing slips through the cracks.

{{ib-guide-crm="/rt-components"}}

All-in-one software solutions designed for mergers and acquisitions investment deal teams automate and streamline the M&A process with customer relationship management, virtual data centers, due diligence management, and more.

Competitive M&A deal teams understand that best-in-class dealmaking is process-driven (workflows need automation and customization) and relationship-driven, and they’re choosing purpose-built deal M&A management software. 

Simplify your M&A deal process with Affinity

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team—and adapt as those needs change.

Affinity’s M&A deal management software makes it easy to plan, capture, manage, and report on M&A deal progress from anywhere, helping your team be more effective and get more done faster.

You get at-a-glance views of all deals across the entire deal lifecycle, a single source of truth that centralizes deal data and contact data and eliminates information silos, and data-driven insights from analytics and reporting that help you make better decisions during the M&A process. 

Most importantly, Affinity’s relationship intelligence enables your team to close more deals by eliminating manual CRM data entry and automatically capturing every interaction with partners, founders, prospects, and investments.

Relationship intelligence converts that raw data into new information—insights into your team’s collective network, business connections, and client interactions that help you find, manage, and close more deals quickly. Your investment banking team can quickly understand who has the best connection, with no manual work.

Affinity’s deal management software can help you streamline your entire M&A process so your deal team can plan, evaluate, negotiate, and execute more deals successfully. Talk to an Affinity sales team member today to learn more.

{{request-demo="/rt-components"}}