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Tips for Successful Mergers and Acquisitions

Mergers and acquisitions are powerful strategic moves to grow your brand’s market share, take advantage of new products and technologies, eliminate competitors and more. This guide provides expert tips on making your next M&A deal a success.

Mergers and acquisitions are powerful strategic moves to grow your brand’s market share, take advantage of new products and technologies, eliminate competitors and more; but, M&A deals are no guarantor of success.

You’ve likely already heard of the statistic that anywhere from 70% to 90% of M&A deals fail. Although this sounds terrible, you can drastically increase your chances of success by pursuing a deal in the correct manner.

This guide provides expert tips on making your next M&A deal a success.

How do mergers and acquisitions work?

Whether you are merging with a company of a similar size or acquiring a smaller company, M&A deals follow the same intricate process. According to PricewaterhouseCoopers, which itself was formed via a 1998 merger, five broad steps encompass every M&A deal.

Assessment & Research – The first step involves finding a target company (or a willing buyer) and researching them. Once you’ve found your target, you typically enter a Non-Disclosure Agreement (NDA) before proceeding.

Initial Negotiations – The next step is to outline the terms and conditions of any potential deal. This will be finalised as a Letter of Intent (LOI), which isn’t legally binding in most cases.

Due Diligence – By far the longest part of the process, conducting due diligence means confirming the facts given to you as part of the previous step. This will usually be handed over to a professional team, focusing on the transaction’s operational, legal and fiscal aspects.

Negotiations – If your due diligence went off without a hitch and you still want to proceed, you will have another chance to negotiate the deal based on your findings. If the seller is happy with the price, you’ll complete all the legal paperwork to make the M&A deal official.

Post-Deal Integration – With your merger or acquisition completed, the final step is to execute your integration plan for your new assets.

Before launching this process, knowing the current M&A market is vital. Jumping in at the wrong time can make an otherwise great deal a -EV transaction.For example, the UK saw a spike in M&A activity in 2022, but volume has fallen since then. According to the Office for National Statistics, inward M&A deal value in Q2 2023 fell to £7.4 billion, a £4.4 billion year-on-year drop, indicating a cooling market.

9 tips for successful mergers and acquisitions

What makes a successful M&A deal?

Some people may say that a confirmed deal is the definition of success, but this is false. Success is defined by the overall impact of the deal in the short term and long term. Poorly planned M&As can lead to massive financial losses, even if your company is technically more prominent than before.

To support you in plotting your M&A journey, here’s a series of tips for making your M&A deal a success.

1. Understand the process

You would be surprised at the number of people who believe a merger or acquisition is like any other deal. The M&A process is detailed, intricate and complex.

Not only must you ensure that the deal makes sense, but your arrangement must also comply with stringent regulations, which differ by jurisdiction.

It underlines the importance of hiring a specialist to better understand each step in the process.

2. Brush up on your communication

Communication during an M&A deal is essential as these deals temporarily disrupt the overall business.

It’s essential to communicate to your stakeholders the reasons behind your M&A deal, its costs, and potential value. Acquiring buy-in and creating a united front is crucial because these deals impact every stakeholder.

3. Don’t rush the process

Due diligence can be frustrating. According to the Bayes Business School, the average length of the due diligence process is 152 days.

While it can be tempting to rush the process, this is a mistake. Anything you miss during due diligence could cost your company dearly. And, remember, the principle of caveat emptor, or let the buyer beware, is in force.

4. Lead from the highest level

The highest levels of your organisation should be the ones to lead every aspect of an M&A deal, including the post-deal integration.

Although it can be challenging to manage, it’s vital that you, as the leader of your company, take ownership to ensure everything comes off as expected.

5. Create an integration plan

Integration plans are not technically part of the M&A deal but for the aftermath of a successful one. Without a measurable plan for the integration, you risk spinning your wheels and encountering problems you cannot overcome.

Ideally, an integration plan should have separate sections for the following increments:

  • 30 days
  • 60 days
  • 90 days
  • 180 days
  • 360 days

6. Build a team you can delegate to

Attempting to manage each detail in an M&A deal and the ensuing integration alone is a recipe for disaster. Before even pursuing a deal, you must build a team and assign responsibilities to each party.

Solicitors, accountants, business consultants and M&A specialists like Hilton Smythe, HR, managers and team leaders all have a role to play in making your move a success.

7. Develop a monitoring system

What’s the current status of the M&A?

This should be something you can answer quickly and confidently. Developing tools for storing confidential data, collaborating, assigning tasks and monitoring progress is essential for maintaining control of every moving part.

8. Hold regular meetings

Assemble your core team and establish a meeting schedule to review and discuss progress. These meetings are the stage where you can receive feedback and tweak your master plan.

Ideally, these meetings should be held weekly, but you may even want to move to daily during critical times.

Remember, meetings ensure everyone is on the same page, and vital information doesn’t fall through the cracks.

9. Don’t be afraid to walk away

The high failure rate of M&A deals isn’t necessarily due to incompetence. In many cases, these deals crumble due to something in the due diligence stage or price negotiations going nowhere.

Never feel forced to continue the process if something doesn’t feel right. Even at the eleventh hour, cutting your losses and running is always better than agreeing to a bad deal.

How to measure the success of mergers and acquisitions

What is success in the context of M&A? Several ways to measure the success of your deal and the integration process exist. Here’s a brief rundown of how you can define success in this field:

Financial Metrics – You can’t argue with numbers. Examining cost synergies, earnings per share, cash flow, market share and revenue growth can tell you much about your deal’s financial impact.

Strategic Metrics – Use strategic metrics to reflect the success of your deal. These include market penetration, brand recognition, reputation and competitive edge.

Cultural Metrics – Culture is critical to creating a business that works. Post-integration, you can look at employee engagement, retention, turnover rates, diversity, communication and trust.

The way you define success depends on your reasons for completing an M&A deal in the first place; but, finances, strategy and culture remain at the heart of determining whether you made the correct move.

Regardless of your reasoning, all M&A deals are complex beasts, taking in financial, operational and legal considerations. That’s why investing in a specialist is crucial to ensure you leave no stone unturned.

At Hilton Smythe, our M&A specialists are experts in providing support for businesses to write their next chapters. To learn more about how we can help you grow through M&As, contact the team now.

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