Planning a Successful Merger and Acquisition Transaction

By Jack Lyons, Mergers & Acquisitions Advisor and Certified Exit Planning Advisor (CEPA)

Like so many other things in life, planning is an important element of a successful merger & acquisition transaction. Granted, a number of mergers and acquisitions happen without planning, but the chance of a truly successful M&A transaction increases dramatically if it is planned for and if the selling company owner has sought professional advice.

This is particularly true for merger & acquisition transactions of mid-market companies valued at less than $50 million. The owners of these companies tend to want to be in control and thus manage the process themselves more than do owners and managers of larger companies. However, this can be very risky due to the subtleties and specialization required to ensure a successful M&A transaction, and it is not uncommon for an owner to be blindsided because of lack of experience, lack of objectivity and overconfidence in his/her own deal-making abilities.

Sometimes lack of experience and objectivity shows up during the due diligence process around issues of timing, thoroughness or disclosures required. In order for the M&A due diligence to be effective for both parties, information exchange should happen as early, openly and efficiently as possible. If there are issues that need explanation, the time for a seller to level with the buyer is early in the process. Informing or letting the buyer find out about issues late in the process is an inappropriate approach that can lead only to lack of credibility and mistrust. Late disclosure often results in renegotiation of the price and terms of purchase or in the buyer’s withdrawal from the deal.

How can you as an owner avoid falling into the traps caused by being unprepared for what might happen during a merger and acquisition transaction? The best way I know is for you—or you and your management team or a third party—to conduct a readiness evaluation. It should involve determining realistically whether your team has the merger and acquisition experience needed for completing a successful M&A transaction, assessing the right time to go to market, ascertaining what needs to be done in advance to prepare for the eventual transaction, and marshalling the resources you need.

A key item to understand prior to initiating any merger & acquisition transaction is the right time to go to market based on company revenue, profitability performance and outlook, M&A market conditions and whether your company is positioned to sell.

There are a number of questions you should ask yourself. Do I know what my needs and goals are? Is there a need to improve company revenue and profitability before going to market? Are company financial records ready—will they hold up to due diligence? Is everything within the company buttoned up legally, operationally, environmentally and managerially? Based on an objective review of the company by an outsider, what needs to be fixed or improved? Can I clearly show an M&A buyer where the company has been, where it is going and how it is going to get there? For this last question, a written three-to-five-year strategic plan and financial forecast is the best solution we can propose if the company is expected to grow significantly.

A good question to ask is how a buyer would view your company. This has to be looked at from the vantage point of a buyer, not from a perspective of personal prejudice. There are over 50 factors, known as value drivers, that a buyer looks at to determine a company’s value. You can increase the value of your company by reviewing it as a buyer would, finding what needs to change and making the changes. Sometimes increasing company value can take a short time, but usually making changes to dramatically increase company value requires an extended period. One of the outcomes of an exit planning consultation is an action plan to increase a company’s value.

Assuming that the above issues have been addressed and it is time to  move toward a merger & acquisition transaction, how will the right buyers be found? We’ve repeatedly seen sellers overlook buyers who might have offered better prices, terms and cultural fits because the seller has identified and become enamored of a particular buyer or group. As an objective third party, I’d say it’s a mistake to overlook other buyers because you think you know someone you might be interested in selling to. Having a broad range of buyers interested in your M&A Planningcompany as a result of a competitive sales process can only be to your advantage. It gives you a choice of buyers and an element of leverage in negotiations. Keeping multiple parties interested in your company during a competitive sales process requires a skilled merger & acquisition advisor and results in an assurance that you will have achieved the most optimal results when you sell.

Jack Lyons is a Mergers & Acquisitions Advisor, a Certified Exit Planning Advisor (CEPA) and president of Lyons Solutions, LLC. He can be reached at 203-642-4141 or at

Copyright 2010 Jack Lyons. All Rights Reserved.