Merger & Acquistion (M&A) – A Practical Checklist (Buyer side story)
I was chatting with my Workshop campaign manager this afternoon.
She informed me that she received feedback from some of my coming Workshop participants that they would like to learn about my personal experiences in my past Merger & Acquisition deals in India, Australia & China.
I have previously given a similar sharing on this topic of Merger & Acquisition to a group of MBA students at the Singapore Management University. This is not an easy topic, but let me just touch on the gist, so as to give you some flavors & quick guidelines.
The whole M&A process can be complex, lengthy & draggy, costly & unproductive, if it were not properly planned out & managed by an experienced M&A Consultant.
Let me elaborate…
Naturally, the Staff of the Seller side will feel sour, trying to hide & conceal numbers, & will never co-operate during the whole Due Diligence process.
On the contrary, the Buyer side will be very nosy & aggressive, trying to find all ways to gain some bargaining power to ask for discount from the valuation / asking price later.
Many different M&A textbooks will tell you there are many different M&A stages & many factors to consider.
However, from my past practical Merger & Acquisition experiences, all these can be summarized in my proven 6-Stage Practical M&A Process to a successful M&A deal.
Here it goes …
Stage 1 Talk
* Talk to Owner, CFO, HR Director, and other Keymen of Seller side to :
– Understand the real motive for selling
– Develop rapport ( with seller )
* Write down Goals, Resources for Time & Money, in a piece of paper, to commit to the Deal
Stage 2 Letter of Intent ( LOI )
* To decide and write down What do you actually want to buy ? ie, Assets only or Assets & Liabilities or Market Share of seller company ?
Stage 3 Pre Due Diligence
* Prepare an Information Request List for the Seller to provide later during Due Diligence
* Get your HR to do a perceived Keymen Organization Chart of the Seller side ( to understand who is / are actually making decisions )
* To form the various Expert & Functional Teams to go into Seller company later
* Plan to complete the Due Diligence < 1 month from LOI ( otherwise there will be no end to the Due Diligence process later )
* To understand seller’s Market, know who are Seller’s Competitors, & find out Seller’s Market position in Industry
Stage 4 Due Diligence ( DD )
* Review Financial Statements & Legal Documents
* Review Costing & Profitability
* Develop a Proforma Adjustment List ( to adjust the Costing and Profits to be in line with Buyer’s accounting policies )
* Develop a List of Contingent Liabilities ( not shown in the Seller’s Balance Sheet )
* Do a financial & Cash Forecast
* Estimate all the New Capital Expenditure to be incurred after the takeover, if any
Stage 5 Closure
* Note : 70-80% of M&A failed due to lack of Transparency & Poor Data quality during DD
* Decision to offer depends on :
a) Buy Asset or Asset + Liabilities or Shares
b) Valuation Method used ( i.e. Assets Based or Discounted Cash Flow with Exit / Terminal Value or other Valuation Methods ? )
* Qualitative Factors to be considered include :
– If Owner is retained ?
– If Intellectual Property is acquired ?
– If Management Control is acquired ?
Stage 6 Integration
* Buyer HR to re-do an official Organization Chart of “Keymen” in the acquired company to avoid confusion and be in line with designations of Buyer company
* Buyer to standardize Policies, SOP, System, Workflow, Document Flow, Report Format / Template for the acquired company to follow
* Buyer side to set Transfer Pricing Policy for the new group to follow
The whole Merger & Acquisition process is an art, it’s success depends on buyer’s EQ, People Skill, Technical skill, Comprehensive Planning skill, & most importantly Sincerity.
Good Luck !
If you need help, feel free to contact us at :
(O) +65 63851011
(M) +65 90880669
