Negotiations in the M&A process
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3 key topics in the M&A process
1 – Valuation & Deal Structure
One KPI I like to discuss is the EBITDA multipliers, and asset-based portfolios that tie into the M&A process. Business owner(s), of course are looking to exit with the most the money the market will bare. Unfortunately, these sellers are mislead with pro-forma data. This skews the financial landscape during the valuation process. Consider the actuals and not the pro-forma data. This is a true representation of the business.
Deal Structure
This is also pivotal when presenting your initial offering. You do not want to offer to low of a cash to stock offer. I would wager with a higher cash to stock offer up front. Maybe a 65/35 Cash/Stock. Also, ask the seller to provide their M&A valuation to gain a better understanding on how they arrived to their target price.
Due Diligence and Risk Allocation
A major key principal in the process is the due diligence process. Time can kill all deals, but in this case for a buyer you really want to check all boxes to make sure that your getting a full and thorough inspection of all pertinent documents. Focus on legal, financial, IT and operational cost as well as cultural alignments.
Cultural and Strategic Fit
Far beyond the financials, these acquisitions must be a good fit all around for both parties and also the employees. We need to focus on the companies cultures and the vision for the future. Successful negotiations prioritize integral planning and post-acquisition synergy for the long term success of the new company.
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