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#AskGGV: What Do I Need For A Successful M&A Deal?

Our introduction to the general merger and acquisition (M&A) process revealed that this adventure is not for the faint-hearted. A staggering 70% to 90% of M&A deals fail for many reasons. How do you ensure that your end business model will perform well vis-à-vis the rest of the industry peers and competitors?

Attaining success at the end of the arduous M&A process isn’t impossible with the right motivations, approach, and realistic expectations. Here are some key considerations and sound advice from founders who have trodden this path before.

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Right resources for an M&A

Before embarking on a merger or acquisition, ensure you have the time and resources required. The average M&A process takes months – and can extend to over a year – and will require input and assistance from intermediaries and advisors, such as lawyers, tax consultants, auditors, and internal stakeholders like CEOs, finance teams, and investors. 

Leverage the invaluable experience of your M&A advisors, and talk to peers, to maximise your understanding of the complicated process. Working closely with your core team will help you create a deal structure optimal for achieving your business goals. And remember:

Take. Your. Time. Like all exciting business ventures, it’s tempting to want to skip ahead and reap the rewards of successful deal closure. However, you want to make informed and calculated decisions at each stage of the process – giving yourself sufficient time to compare offers, carry out careful negotiations, and “sleep on it” are all part of the process.

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Taking a smart approach 

Should you take the first deal on the table? The answer may be obvious to most, but it comes down to having a realistic view of your leverage, understanding the risks and issues involved, and weighing non-financial terms against price.

Your bargaining power is greatest before the letter of intent or term sheet is signed. You can avoid setting yourself up for a lowball offer by lining up multiple interested parties and negotiating terms before signing a Letter of Intent (LOI). 

Do your homework and pay attention to details to ensure you have all data required to best structure the deal and shape the parameters of negotiations – identify any hidden values, costs, and terms and conditions. This will allow you to protect your company by addressing any critical issues that could lead to more significant problems later and increase the likelihood of arriving at a favourable deal.

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Aligned visions

Be clear on what makes your company successful and why the companies are integrating. Deciding on investors isn’t about choosing the one with the deepest pockets. It’s about having the company’s best interests at heart and a deep understanding of what it takes to propel it forward. 

For Thunes, taking a majority stake in anti-money laundering (AML) and compliance firm Tookitaki accelerates global growth for both companies. At the same time, their solutions also empower banks and fintechs to combat payments-related financial crime, a shared passion of both companies. 

The combined entity that emerges from a merger or acquisition may have a redefined mission, vision, and values that will eventually be translated to overall business operations. Stay the course and ensure that the strategy, resources and talent are in place to deliver on that promise with a common purpose and identity.

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Achieving success together

Bringing two companies together is not dissimilar to marriage; it’s crucial to have compatible cultures and share the same values, whether at the leadership or employee level. Friction among teams can limit effectiveness and ultimately affect profitability. 

Depending on how much control you want to retain as a founder, you could choose to hand over the CEO reins and stay on as an advisor while remaining free to focus on other business ideas and pursuits. You could also negotiate a stock options deal or royalty deal on future sales of products and services. 

Change is never easy for anyone, but founders can take measures to avoid losing morale or key talent. First and foremost, you must provide resources, transparency, and regular communication to support and assure employees throughout the transition and create a positive environment.

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