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Acquisitions may appear easy on paper, but making them work in the long run requires strategic thinking and careful planning. Many entrepreneurs end up unhappy with their latest acquisition if they fail to follow time-tested steps to prepare, execute and integrate an acquisition.
The first step is to design an acquisition strategy. The best acquirers have specific, well-articulated ideas for creating value in the deal. This could include expanding into an international market or filling gaps in their portfolio. They have a business partner and a team that will perform the analysis and negotiations, and a plan to close the deal.
Value and Deal Structure
The next step is to determine the price at which the purchase should be made. This is accomplished by comparing the valuation method with the financial records of the company. It is crucial to take into consideration the market position of the target and its cash flow stability and how well it is systematized. It is also crucial to know if the acquisition is an asset or equity deal and the tax implications.
Negotiation and Closing
Through the entire process, it’s important to focus on the customer. It is also crucial to avoid cutting corners or overlooking negative results that could affect the transaction.
In the end, it is crucial to have an experienced team to guide the M&A process. This is especially important during the due diligence stage in which it’s easy overlook details. In addition, communication with employees is key–this can be a stressful time for the employees of the company that was acquired and it is essential to be open and provide transparency.