It seems that between 10% -20% of acquisitions end “… in tears”, and this arises in aspects such as when the expected value of the acquisition is not generated, problems arise regarding legal aspects, non-suitability of the chosen candidate, complications in integration, among others. It is very logical that investors or buyers should have the absolute focus on ensuring that a particular corporate operation is a resounding success. There is a lot at stake, from time invested in the operation by members of the management, costs of financial advisers, lawyers, among others. It is very important to consider that the fall in the reputation of an unsuccessful operation falls directly on the team that has directed it. In other words, it is essential to ensure that the post-completion operation is a complete success to redound in value for the buyer and will encourage them to continue with the process on a recurring basis.
To mitigate all risks and ensure the success of the operation as much as possible, it is essential to carry out an intense preliminary work of research and analysis so adequate and deep that it confirms that a certain candidate makes strategic and financial sense at the end of the acquisition process. and its subsequent integration.
Aspects to review in the “pre-deal” phase:
Review in detail the candidate’s assets, such as existing know-how, industrial capacity, market access, market positioning, commercial team or financial position, which will help us grow and generate value after the acquisition.
To ensure that there is no more efficient and faster way for the growth of our company than the acquisition instead of trying an organic process.
Identify the elements that, in the integration, allow us to achieve increases in value both in the short and medium term, in particular those related to the achievement of operational, commercial, technical, financial synergies, among others.
Understand the strategic fit of teams and people in a post-deal situation, especially understanding the duplication of functions or departments and see the treatment that is going to be given to mitigate conflicts.
Correctly structure and value the operation in line with the investors’ strategy.
In general, answers to these questions are obtained by procurement teams and consultants, through meetings between the parties and especially by having access to quality information from the target company, in an organized data room.
If the company for sale does not provide quality information in a structured way in a data room ordered under a Due Diligence format, months of work will take place, with a request for information and adequate responses, it is very likely that the investor will reject the operation or entail unnecessary wear and tear on the process and frustration, as well as an extra cost incurred by professionals such as consultants, auditors or lawyers.