Important steps of a M&A process 

The M&A (mergers and acquisitions) process involves a series of steps that are typically followed to complete the sale and purchase of the assets or shares of a business, commonly known as the “Target”. Earlier, Anand Jayapalan had mentioned that the buyer company typically strives to purchase the Target at the best possible price, while the seller aims at achieving the highest price for the Target and getting a clean break from any continuing liabilities.

M&A process can be broken down into multiple steps, including:

• Step 1: Strategic planning, target identification and initial research- The very first step is to identify the Target, and research on whether it would be a good fit for the existing business. It would be prudent to identify any synergies between the businesses and think about what changes might be necessary to complete a successful integration. Careful consideration must be provided to any clearances or consents, which might be needed during the process. Pre-sale restructuring steps might also be required at this stage. From the buyer’s perspective, the initial step may involve securing financing for the transaction. Buyers might need to obtain funding through a loan (debt finance) or by issuing additional shares (equity finance). Typically, the buyer should have a financing plan or offer in place prior to committing to Heads of Terms and finalizing the deal timeline.

• Step 2: the offer – If everything looks good after the first step, then the deal shall move to the second step, which involves agreeing to the key terms of the deal, including its structure, timing, price, and conditions. Confidentiality agreements or non-disclosure agreements must also be put in place at this stage before disclosing any kind of sensitive business information to interested buyers. 

• Step 3: due diligence- Due diligence basically is an information-gathering exercise that is performed by the buyer on the “target” company. The goal of doing so is to make sure that buyer has enough details about the Target to be assured that the acquisition must go ahead and that the terms of the deal make commercial sense. In case any such major issues are brought to light during the due diligence process, then there might be a renegotiation of the price or certain indemnities and/or conditions included in the acquisition agreement.

• Step 4: the ‘legals’ – This step involves the lawyers of both the parties drafting and negotiating the terms of the transaction documents. The primary document would be the sale and purchase agreement which contains the terms of the deal agreed between the parties.

After the steps mentioned above, one would come to the closing stage. Earlier, Anand Jayapalan had mentioned that a good deal of planning and organization is needed for this stage to see to it that the necessary paperwork is agreed and ready to sign on both sides. It is at this stage that teams of M&A lawyers will be liaising in order to make sure all goes smoothly. Traditionally, the signing and exchange of documents was carried out at completion meetings where all parties and their legal teams were present. Today the process can be done virtually as well.