An acquisition deal is a complex sequence of activities that moves from strategy and target identification to due diligence, negotiation, closing, and post-merger integration. A straightforward acquisition can close in 90 days; a complex one may take two years. It’s harder than the headlines make it look, but a good deal can pay for itself many times over in increased revenue and profits.
The first step in an acquisition is to define the strategic motivation. Is it to consolidate a market segment (horizontal) or control a supply chain cost structure (vertical)? Are you buying a competitor to accelerate growth or shut them down? Choosing the right type of target drives the entire M&A process: investment criteria, target profile, integration approach.
After a preliminary negotiation, the buyer formalizes their offer in a letter of intent. The LOI lays out the key terms: purchase price, payment structure, escrow size, diligence timeline and other conditions. It is typically non-binding, but includes important provisions like exclusivity.
This stage involves a deeper dive into the business’s operational details: how it actually makes money, where the risks are and whether it makes sense at the price being discussed. It’s often a race against time.
At this point, serious buyers assemble teams to run confirmatory diligence. It’s a huge challenge to coordinate workstreams from legal, tax, finance, accounting, IT, insurance and more. It’s critical to uncover any liabilities and open legal matters that the seller failed to disclose.