An M&A process is a structured process of preparation, marketing, negotiation and closing in which a company is sold or acquired. The process has five main stages and takes 6-12 months on average, depending on the complexity and market conditions. Professional guidance is crucial because of the legal, financial and strategic complexity of M&A-transactions.
What is an M&A process and why is it so complex?
An M&A process covers all activities when selling, buying or restructuring companies. The process combines strategic, financial, legal and operational aspects that must be managed simultaneously for a successful transaction.
The complexity arises from the convergence of multiple legal domains: competition law, labour law, tax law and company law. In addition, employee participation, valuation and deal structuring play a crucial role. For entrepreneurs with more than 50 employees, the legal information rights of the works council come on top of this, which can create procedural pitfalls.
Professional guidance from corporatefinance advisers prevents costly mistakes. They act as process directors, negotiators and sparring partners who translate the business into a clear sales pitch. Without expertise, risks arise around valuation, buyer selection and documentation that can damage the transaction value.
What stages does a typical M&A process go through?
A structured M&A process has five main phases: preparation, market approach, indicative bids, due diligence and signing/closing. Each phase has specific objectives and milestones to be achieved for successful progress.
Phase 1: Preparation includes analysis of strategy, financial results, organisation and market position. Value drivers and bottlenecks are identified, a realistic valuation range is determined and a teaser plus information memorandum are prepared.
Phase 2: Market approach involves compiling a buyers' list and discreetly approaching potential buyers. The information memorandum is shared with qualified parties expressing interest.
Phase 3: Indicative bids results in preliminary bids from which preferred buyers are selected. Bids are compared on price as well as conditions, not just the highest amount.
Phase 4: Due diligence is the extensive research process where selected buyers analyse all aspects of the business. Parallel to this are negotiations on the final purchase agreement.
Phase 5: Signing and closing involves signing contracts and the legal transfer of ownership, settling all terms and conditions.
How long does an average M&A process take?
A typical M&A process takes 6-12 months from preparation to closing. The lead time depends on the preparation, complexity, number of parties involved and negotiation intensity. Good preparation shortens the timeframe considerably.
Smaller transactions with limited complexity can be completed in 4-6 months. Larger corporate sales with international buyers, complex structures or competition supervision often take 9-15 months.
Factors affecting lead time include company size, number of potential buyers, financial complexity and regulatory approvals. Delays often result from incomplete preparation, making due diligence take longer and negotiations more difficult.
Market conditions also play a role. In an active takeover market with many buyers, the process is faster than in a reluctant market, where buyers are more selective and take more time for decision-making.
Which parties are involved in an M&A transaction?
An M&A transaction requires cooperation between specialised advisers, each bringing their expertise. The corporate finance adviser coordinates the process and works closely with lawyers, tax specialists and accountants for optimal results.
Corporatefinance advisers act as process directors and lead negotiators. They determine valuations, approach buyers, organise bidding rounds and structure deals. Their role includes strategic advice and practical execution of the entire sales process.
Lawyers provide contract documentation, due-diligence guidance and negotiation of warranties and indemnities. They ensure legal compliance and risk management throughout the process.
Accountants provide financial data, provide carve-out figures for partial sales and support in tax structuring. Early involvement of accountants is advisable for smooth disclosure.
Tax consultants optimise the tax structure of transactions, advise on merger versus equity deal structures and assist with complex tax issues, such as earn-out constructions.
What happens during the due diligence phase?
Due diligence is the comprehensive research process where buyers analyse all aspects of the target company to identify risks and validate the valuation. The process is coordinated through a digital data room with structured disclosure.
The study covers four main areas: financial, legal, operational and commercial due diligence. Financial analysis focuses on historical results, cash flows, balance sheet positions and financial projections. Legal review deals with contracts, disputes, compliance and liabilities.
Operational due diligence examines business processes, systems, organisation and management capabilities. Commercial analysis evaluates market position, competitive relationships, customer relationships and growth opportunities.
Buyers ask additional questions during this process that need to be answered. Findings lead to price adjustments, additional warranties or changes to the deal structure. A well-prepared seller with complete documentation goes through due diligence faster and maintains a stronger negotiating position.
How do you prepare your company for an M&A process?
Preparing for a takeoverprocess starts with putting records in order, optimising business processes and putting together a management presentation. Thorough preparation builds buyer confidence and a stronger negotiating position.
Administrative preparation includes completing financial statements, contract files, personnel files and legal documentation. Missing documents create delays and mistrust during due diligence.
Identify and address value drivers, such as extreme customer concentration, strong DGA dependency, unclear figures or ongoing litigation. These factors can significantly affect valuation and should be addressed upfront where possible.
Optimise operational processes and financial reporting for transparency and professionalism. Put together an informative management presentation that clearly presents the strategic position, competitive advantages and growth opportunities.
An exit-readiness scan by experienced advisers identifies areas for improvement and optimises valuation through timely preparation. This process focuses on balance sheet optimisation, profitability and operational performance indicators that are value drivers for potential buyers.
The M&A process requires strategic planning, professional guidance and careful execution. We support entrepreneurs in all aspects of complex transactions, from preparation to successful completion. For personal advice on your specific situation, please contact with us.
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