Every year, a lot of mergers and acquisition transactions are usually reported. Smaller companies are usually acquired by larger companies while competitors usually merge to create a formidable entity with a larger market share and bigger asset base. Mergers and acquisitions are a norm in the corporate world, and there are numerous M&A advisors in every major city to help clients buy or sell businesses. It is important to note that the M&A process has two sides; the buy side and the sell side. Any company that specializes in M&A advisory must have professionals to help with buy transactions as well as others to help clients sell their businesses. Keep reading to learn about The Buy Side M&A Process – An Overview to Acquiring Companies.
How the Buy Side Process Works
On the buy side of an M&A, the client is a prospective buyer of a company. This can be an individual investor, a business owner, or a corporate entity. The client is looking for a suitable company to purchase, so the M&A firm will scour the market for businesses for sale. In some cases, the client might have already found a suitable business they want to acquire but needs professional assistance to close the deal. The following is a list of services offered on “The Buy Side of an M&A:
- i) Finding Businesses for Sale
The first thing the buy side will handle is finding a suitable business for sale. Large M&A companies usually have an online business listing while others can easily find businesses for sale through their networks. Whatever the case, the M&A firm will provide numerous options to the client. The only details the client needs to provide are the industry of interest, budget, country, state, and size of the business.
- ii) Due Diligence
Before buying a business, due diligence must be performed to ensure the seller of the business is the owner of the business. Research must be done to identify any court cases the target company may be embroiled. During the process, research must be done on the reputation of the company, total assets, liabilities, profits, total revenue, growth projections, and market share among other things. This is what will help the client make a decision.
Due diligence is crucial because nobody wants to buy a company that looks great on paper, but cannot offer value for money. The process is usually undertaken by a team of financial experts and may take a lot of time.
iii) Valuation
A business opportunity must first be appraised to determine its actual market value. This is crucial because you cannot make an offer to buy a business if you do not know its actual market value. Several methods of valuing a business exist. The M&A firm will use numerous company valuation methods and give you an accurate estimate of what the market values the target businesses. This price must be compared to the asking price. When making an offer, a lower price should be quoted to leave room for negotiations.
- iv) Making an Offer
One of the most important aspects of the buy side of an M&A process is the preparation of the offer letter. The offer letter is a legally-binding document, so a lot of thought should go into it. The M&A firm will work with the client to prepare the offer letter and take care of all the necessary paperwork once the offer is accepted.
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