Mergers & Acquisitions: How to Get “Deal-Ready”

Whether or not your company is on the verge of buying or selling, you should take steps now to prepare for future deals. The reality is that mergers and acquisitions (M&A) are now a regular part of doing business, and investing some time and careful planning upfront can make the difference between a successful deal and a huge headache.

When the time comes, you’ll be glad you prepared.

The Deal Climate

Today, most middle-market companies eventually buy or sell. Each year, about 25% of these companies acquire or sell a business, making M&A a major growth driver.

And not all deals are pre-planned. While most happen when a business is looking to buy or sell, it’s common for an opportunity to unexpectedly present itself and business leaders to capitalize on the moment.

M&A deals are happening all the time. But that doesn’t mean that middle-market executives are M&A experts. In fact, most admit that they have extremely limited M&A experience, which can lead to bad deals and unexpected challenges down the road.

Mergers & Acquisitions

In a recent study, the National Center for The Middle Market and Ohio State University surveyed 400 middle-market business executives who had undergone mergers and/or acquisitions over the last three years. M&A is key to the success of these business. However, as you can see, most of the executive surveyed lack significant M&A experience.

 Most Middle-Market Execs Lack M&A Experience

Source: National Center for The Middle Market & Ohio State University.

“As a result of this inexperience, middle-market executives fail to drive the best bargain, or may encounter unexpected challenges,” according to the study.

But that’s not to put the blame on business executives. The fact is, managing M&A is extremely complex. Striking the right deal requires a vast range of expertise.

Common Challenges for Buyers and Sellers

Executives know their business better than just about anyone. But that doesn’t mean that they have the tools, knowledge or resources to pull off a successful M&A on their own (though many try).

Mergers and acquisitions are common, but they’re deceptively complex. Let’s take a look at some of the top challenges for buyers and sellers.

Buyers Say These are Some of the Toughest Parts of M&A

Source: National Center for The Middle Market & Ohio State University.

For Sellers, These are Some of the Biggest Challenges

Source: National Center for The Middle Market & Ohio State University.

Buyers & Sellers Agree: These are the Most Difficult Aspects of M&A

Source: National Center for The Middle Market & Ohio State University.

How to Get Deal-Ready

Being “deal-ready” means that, whether or not you’re actively buying or selling, your company is ready for a successful M&A. Here’s what you can do to prepare:

  • Get your accounting in order.
  • Create a budget and projections. Track key performance indicators to better understand your company’s potential.
  • Document financial and operational processes and procedures.
  • Prepare for due diligence.
  • Improve working capital management.
  • Understand your capital options.
  • Engage with trusted advisors.  

When it comes to due diligence, it pays to bring in an expert.

Due diligence (the process of appraising a business) is at the core of every M&A transaction. it can significantly impact your ability to get an accurate valuation and, ultimately, a good deal.

It’s also a time-consuming process (3-6 months, on average) that requires a major commitment from senior managers—as well as some niche expertise. If you’re buying, you want to ensure that you’re asking all the right questions throughout the process. If you’re selling, you should be prepared to answer.

Mergers & Acquisitions

Due to the complexity, the time commitment and the unfamiliar territory of due diligence, most companies enter the process unprepared. That’s why it’s important to enlist outside help.

“Due diligence is where you really want to bring in an accountant, an expert who can guide you through the process and ensure you’re getting the value you deserve,” says Leo Misdom, Principal Shareholder, Accounting & Advisory Services Departments at Dugan & Lopatka. “Trying to perform due diligence on your own is sort of like going to court without a lawyer. There’s tremendous value in having an expert by your side who knows the ins and outs of the process.”

At Dugan & Lopatka, we have guided numerous middle-market businesses through successful mergers and acquisitions, and we’ve helped many others plan ahead, so they’re ready for a deal when the time comes. Whether you’re looking to buy or sell—or want to prepare your business for the future—we can help.

Contact us today and learn how we can help your company become deal-ready.

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