The mergers and acquisitions (M and A) process poses numerous challenges along with immense opportunities. Many companies will hire an M and A advisory firm to assist with the process. You might wonder what a full-service mergers and acquisitions firm will contribute. An advisory firm can assist with these five tasks.
Targets
Many companies are at the exploratory phase of the process. They may not yet have clear target lists, and a full-service mergers and acquisitions firm can help a business identify targets. The potentially acquiring company can provide criteria, such as consolidating its market positions, vertically integrating materials sources, or diversifying its interests. The M and A firm can then screen for possible targets matching the criteria.
Due Diligence
Just because a company makes it through the screen doesn't mean it's necessarily a good merger partner or acquisition target. Due diligence is critical. An M and A advisory firm can assess the financial statements of the target. Likewise, an advisor can dig into accounting practices and legal concerns. If there are red flags, the advisor can bring those to your attention.
Valuation
One of the central challenges of mergers and acquisitions is valuing target companies. The valuation has to be fair enough to justify the purchase, but it also has to be sufficient enough to get the other side to sell. An advisor can look at net asset values, cash flows, custom acquisition costs, projected earnings, and lifetime values to arrive at a reasonable figure. They also need to discount the associated risks with the purchase.
Negotiation
Mergers and acquisitions rarely go through after the first proposal. You will almost certainly need to negotiate. Target executives will often have questions about their futures with the combined entity. Both sides will likely want to move the price tag in their direction. The acquiring company may offer options in the combined entity to provide long-term incentives to folks who want to keep some upside in the operation's future.
Communication
You will also need to communicate with numerous stakeholders. Shareholders and executives in both companies will have questions. If the deal is big enough, it could also attract media attention or even public scrutiny. Government agencies might also have questions about the future of the combined entity.
An M and A advisory firm can develop a PR strategy, issue press releases, and field questions. They also can keep all stakeholders up to date on the status of the process.
Contact a firm like Sun Mergers & Acquisitions to learn more.
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