Mergers and acquisitions between business entities can be said to be successful when the management strategy is clear and distinct enough to ensure the synergistic benefits of such mergers and acquisitions, along with cultural compatibility between the entities involved in the merger and acquisition. Check how to avoid five of the most common pitfalls in M&A in the article below.
Mergers and acquisitions: what affects the success of an M&A deal?
The effectiveness of the functioning of an economic entity in a competitive environment is determined by its ability and opportunities to constantly increase economic and production potential and the use of the most effective factors and “growth” points, for which the firm can use internal growth reserves or attract external investment or resort to merger and acquisition procedures. In global practice, mergers and acquisitions agreements have been used for a long time and successfully as a tool for increasing the economic potential of companies and anti-crisis corporate management.
As with most things in life, there is no secret recipe for a successful merger. A well-developed strategy, a smart management team, and an eye for detail – this is what make up the essence of a successful merger. While strategy is important to most mergers, cultural compatibility is the soul of the merged entities.
Combining organizations through merger and acquisition agreements or their separation due to the exit of the company from the composition of the association and the sale of assets is one of the most difficult types of activities of the organization that it can face. CEOs create strategies and often make the final decisions on M&A. They also go to their financial directors so that you help them find the companies they need for the business, conduct a comprehensive review, and know that they took care of all the formalities after signing.
How to avoid five of the most common pitfalls in M&A?
For a long time, the limiting factor in the growth of the number of mergers and acquisitions was the lack of necessary free financial funds from companies that were ready for such a variant of their development strategy, as a result of which the main players in this market were mainly mining and processing enterprises that had the opportunity to generate free cash funds in large volumes. However, recently the number of tools that companies can use to finance M&A has increased – buyouts with debt financing are used, companies place additional issues of their shares on the market, use bond loans, etc.
Among five the most common pitfalls in merger and acquisition, which are essential for success, are the following:
- Chasing the deal without keeping an eye on the bottom line.
- Ignoring regulatory issues.
- Failure to conduct due diligence.
- Buying a company licensing technology instead of the rights to the technology.
- Failing to ensure all the right assets are compatible.
The data room in France is the only audit and consulting firm that can provide consulting services to corporate and private clients in the field of direct investments throughout the entire cycle of mergers and acquisitions. From developing a strategy to choosing the right partner, from conducting a thorough pre-investment analysis to closing the deal. From inception to completion of the M&A process, they tailor their services to meet your dealmaking, integration, and spin-off needs with one goal in mind: to create value for the clients.