The M&A market is constantly evolving. The motives and structures of deals can change from year-to-year but one thing is constant: the amount of work needed to close the deal. Performing valuation and due diligence are two of the most time-consuming elements of the process.
M&A can aid in making companies more robust and able to endure tough times. The strength of a company that is combined is more likely to endure in a changing world than the weaknesses of an individual entity. For instance, banks are using M&A to protect their balance sheets by buying out struggling competitors such as Merrill Lynch.
In addition, M&A enables companies to achieve economies of scope by extending their product range. A technology company might, for instance, acquire a platform that will expand the range of products and services that it provides its customers. This strategy could also improve customer satisfaction, which may help improve the financial performance of the company.
The M&A begins with a discussion at a high level between the buyer and seller to determine how their values align and examine synergies. The next step is due diligence, which includes creating financial models along with operational analysis, as well as cultural fit assessment. Due diligence is often an extended process, therefore the timeline in the letter of intent (LOI) should be considered when planning for this work. One of the most important aspects of due diligence is conducting searches, such as UCCs and fixture filings. federal and state tax liens as well as litigation, judgment liens, bankruptcy and intellectual property searches.