9 Stages of Transactions in Mergers and Acquisitions

Mergers and acquisitions are never the same, as there are a multitude of variables involved. That said, there are typically nine broad stages that apply in most merger or acquisition transactions.

In this blog, we will give an overview of the nine stages of transactions in mergers and acquisitions, mainly from the perspective of the acquiring organisation. However, the majority of the points have relevance to all parties involved.

Stage 1: Strategy & Preparation

This stage starts with defining your goals, so there is full clarity on what you want to achieve. Examples include:

• Expanding into a new market
• Strengthening operational capabilities
• Accelerating growth
• Acquiring assets, technologies, or intellectual property

The strategy and preparation stage should also include an assessment of your organisation’s internal readiness for the merger or acquisition, so you can identify weaknesses to strengthen. Assessing potential financing models and deal structures is also worthwhile at this stage.

Stage 2: Target Identification & Valuation

You can identify potential target companies, but companies can also put themselves in the shop window as a potential merger or acquisition target. Companies that want to sell will typically create an Information Memorandum. This contains details of the company to ascertain if there is market interest from potential buyers.

Whether you are identifying potential target companies or evaluating a company interested in selling, you should focus on businesses that meet your strategic and financial criteria.

An important part of this process is to conduct a preliminary valuation analysis, i.e., what is your initial estimate of what the company is worth? Typical areas that are considered at this stage include:

• Past financial performance
• Growth potential
• Market reputation
• Cultural compatibility

This stage also usually involves initiating a dialogue with the target company, especially if the acquiring organisation is taking the lead. Building rapport is essential in this phase as you get a better understanding of the willingness of the target company to consider a merger or acquisition transaction.

Stage 3: Due Diligence

Due diligence is a crucial stage that should not be skipped or short-circuited. It involves a detailed and exhaustive examination of the target company, including its financials, assets, liabilities, and operations.

Key objectives include:

• Identifying risks
• Uncovering previously unknown information
• Confirming or adjusting the company’s valuation

Due diligence is often also carried out by the target company on itself so it can identify and mitigate potential issues as soon as possible.

Stage 4: Legal Considerations

Mergers and acquisitions often involve legal considerations that should be assessed and, where necessary, acted upon as soon as possible. Examples include:

• Competition and consumer protection laws
• Employment law
• Licensing

Stage 5: Negotiation and Structuring

With the previous steps complete, you can enter the negotiation stage with all the information you need. This part of the process involves negotiating the purchase price as well as the terms and conditions of the transaction.

The type of transaction will also be part of the negotiation, i.e., will it involve cash, assets, stock, a merger, or a combination.

Warranties and indemnities will also have to be agreed upon before the agreement can be finalised.

Stage 6: Financing

You are likely to have already considered your financing options for the merger or acquisition. This is the stage where you should secure financing, so you have everything in place, ready for completion of the deal.

Stage 7: Regulatory Approval

Depending on the circumstances of the transaction, you might need to obtain regulatory approval for the merger or acquisition.

For example, approval from Ireland’s Consumer Protection Commission (CCPC). The CCPC must be notified if the merger or acquisition meets a certain financial threshold. Its role is to assess whether the transaction will have a “negative effect on consumer welfare”.

Stage 8: Close the Transaction

Closing the transaction involves ensuring all the conditions of the deal are met before completing the formal transfer of ownership.

Stage 9: Post-Deal Integration and Stakeholder Buy-In

Stage nine of the process represents the end of the transaction phase, but it also represents the start of the process to ensure the merger or acquisition is a success. Therefore, it is crucial to develop and implement a post-deal integration and stakeholder buy-in strategy.

This strategy should include and involve employees of both companies, as well as customers, suppliers, and partners of the acquired company.

Merger and Acquisition Support from Gilroy Gannon

At Gilroy Gannon, we have extensive experience in mergers and acquisitions in Ireland. That experience includes representing parties on all sides, including acquiring companies, companies that are the subject of a merger or acquisition enquiry, and companies that want to put the business up for sale.

To speak to a member of our expert team, please get in touch to arrange a no-obligation consultation.