10 Key Phases of Mergers and Acquisitions

Mergers and acquisitions had been going through ups and downs until 2021. The United States overtook Chinese companies, which were ruling for over two decades. This upheaval or fluctuation is seen because of several reasons.

There are a few key phrases of merger and acquisition activities that can make or break your deal. So, here you can discover those phases and how you can win a breakthrough with them.

What is Merger and Acquisition?

Merger and Acquisition is a process of integrating companies or business assets to achieve synergy. It aims at enhancing business worth or value and achieving scalability by consolidating the power or productivity of two companies/ business assets.

These days, online alternatives are there to find the best entity for investment. Bankers Deals is one of the finest examples of this kind. It saves the time to physically find a deal for merger or acquisition.

10 Key Phases of Mergers and Acquisitions (M&A)

Let’s get started to discover all steps involved in M&A.

1. Developing a Strategy

A strategy is a must-have for defining your expectations. Here also, an M&A strategy guides you to set clear goals for buying and selling parties. Simply put, the requirements of both parties should be crystal clear beforehand, which this phase defines.

You may consider these points to define your own strategy:

• The clear purpose

• The end-operating model or condition

• Method of acquiring financing for the transaction

• Discover all entities that are involved in proactively controlling due diligence

2. Define Target Criteria & Identify

This step or phase is dedicated to searching and measuring potential target companies. It will make the path easier. You would have discovered the parties being involved, their profit margins, geographic locations, customer base, etc. This knowledge will ensure a smooth due diligence process.

There are mainly two points you should consider:

• Consider it for a general merger because it helps you know the target. If this merger is triangular, determine the target and the subsidiary.

• Before signing the deal, find out what it is, where it is, and it comes from which industry/niche. Now that you know, discover if it can do business offshore or outside the state or country.

3. Valuation Analysis

If the initial conversation goes well, the legal team of the target company seeks substantial information. It is about the current financial status, operations, customers, products, etc. This discovery assists the acquirer to evaluate the target, both as a business and as the best-fit acquisition target.

It also helps in finding out if they are in compliance with all jurisdiction requirements. It’s really crucial, which can be a deal maker or breaker. Sometimes, the issues might be there. In that case, identify if they are addressable and how much time it will take.

This evaluation finally makes it easier to confirm that all entities are in good standing and eligible for the next level/phase.

4. Negotiation Is On

The valuation analysis leads to negotiation, which is to make an agreement at the end. The acquirer should be very focused at this phase. It should collect all details (from the niche and market) or necessary information to draft a reasonable offer.

This initial offer leads to negotiation in detail.

5. Executing Due Diligence

This is the most exhaustive procedure because the offer has been accepted by then. During this process, a detailed overview and analysis of the target company take place through buyer and lender counsel. It covers internal and external resources. This is how the acquirer confirms the value of the target company, which includes these details:

• UCCs, fixture filings, federal/state tax liens, litigation (local and federal), judgment liens, bankruptcy, IP searches, etc.

• Charter documents (all documents on file versus restated forward), records of good standings, “bring-down” letters, credit reports, etc.

• Formation of shell/holding companies, potential qualification of an entity in multiple jurisdictions after the alliance

6. Closing the Deal

As due diligence is over, both parties agree or disagree to carry out transactions. Here, the role of legal teams is significant. They make corporate or pre-clearance filings in advance (before the closing date). These filings include merger filings, amendments or changes, ordering of good standing, or issuing bring-down letters. Also, reserving a name, reinstating an entity, forming an acquisition subsidiary, collecting supporting documents, & more can be required for closing a deal.

Sometimes, an entity has to pay for filing annual franchise taxes to eventually merge.

7. Financing

However, the financing aspect is assessed during the planning phase. But, its final details come out once the purchase and sale agreements reach the finishing line.

This is also a time-taking process, which can delay the closure. Appointing a director/manager (from the board) can do it in a quick turnaround time.

This phase requires filing UCC1 and UCC3 forms and executing post-closing searches to ensure these forms’ proper indexing.

8. Integrating the Acquired Company

This is an always-on task. You have to manage the acquired company properly. Before that, its integration should be seamless, which both parties define.

The legal team also appears in a key role during this phase. It looks into entity planning and compliance work, which includes.

• Annual filings

• Redefining governance structure

• UBO registrations, KYC compliance

• Registered agent/address services

• Entity setup, consolidations, and/or local entity management

• Legal representation/directorship services (where required), etc.

9. Post-Merger Compliance

As the merger is complete, jot down the compliance requirements that are concerned with the surviving and non-surviving entities. It is observed that most companies are unable to see what’s beyond this merger. Updating licences & permits, tax registrations, name registrations, etc. can be required at this stage.

Here, compliance is important. It comes up with a complex series of activities. Underestimating them can invite short or long-term risks.

10. Smooth Sailing of Business

Upon completing the post-merger compliance, the newly set up entity requires consistent monitoring and compliance. If these two aspects are attended to well, there is nothing that can stop it from achieving heights.

These key phases are must-haves if you want a glitch-free merger and acquisition.