Last Updated on May 14, 2023 by Flavia Calina
Consulting firms are often hired by companies that are considering doing a merger or acquisition. They help them identify suitable targets and conduct the entire process from start to finish. They also offer strategic advice on various business issues such as pricing, sales or marketing strategy. This type of consulting is usually highly specialized and requires a high degree of integrity.
Due Diligence
Due diligence is the most time-consuming and critical part of any merger and acquisition project. It thoroughly examines the target’s financials, operational assets, legal issues and strategic position. Depending on the scope of the transaction, both parties typically pay for their teams of lawyers, accountants and other consulting professionals to perform due diligence. For example, an M&A deal may require an accounting firm to analyze the tax profile of the target company. It could also involve industry consultants and environmental and labor attorneys. As a result, both parties must be prepared for a considerable amount of documentation and requests for information they might have yet to expect. Both sides should create comprehensive lists of documents they need and who is responsible for efficiently collecting them and submitting them to the other party.
Target Search & Selection
During the process, M&A consulting firms do a lot of research on potential target companies. They try to find out if it makes sense to buy the firm and what the price should be.
The target company’s business strategy and possible cooperation are also being studied. They do this by using public information and private databases.
In addition, they try to identify the target’s potential buyers, investors or sellers. They do this by comparing the company’s strengths, weaknesses, customers and market.
The search for a merger candidate can be a time-consuming and challenging endeavor. It is why companies tend to use outside help from an experienced firm.
Integration Planning
During a merger and acquisition project, integration planning should be taken seriously. It’s one of the most critical phases of a deal and can increase value by 6-12%.
It requires a strong plan, starting with a practical data-driven planning framework and a transparent, justifiable decision-making process. It also involves identifying challenges and critical risks that can be addressed to deliver on strategic goals.
A well-created and distributed M&A integration plan is necessary to achieve these goals. It should also address the need for IT systems integration.
A well-executed plan can help a company avoid many mistakes resulting in billions of dollars lost annually due to misimplemented integration efforts. It’s a complicated undertaking, and a successful merger or acquisition requires discipline and specialized resources.
Valuation
During M&A projects, consulting firms typically offer support on carve-outs, target search and selection, company valuation, capital structure optimization, identification of refinancing levers from alternative sources, and stakeholder management. They also have a range of services for integration, including assessing the target company’s business value and the merger’s value creation. Valuation entails the use of different methods to estimate the value of assets. These methods include earning value, market-value and asset-based approaches. The role of valuation is to determine the price that investors are willing to pay for a given investment or firm. It is essential for small private businesses seeking venture capital or private equity financing and larger companies going public and acquiring or merging with other firms.
All business valuations aim to arrive at a number that is fair to both the investor and the seller. It can be done by analyzing a wide range of factors, including new information, market trends, other investors and the overall direction of prices.
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