Mergers and acquisitions are some of the most common business deals. At the same time, such transactions are quite complex, time-consuming, and involve significant risks. So, how to negotiate business acquisition securely?
M&A market trends in 2022
Nowadays international mergers and acquisitions (M&A) have become a reality for all types of companies. Private business owners have recognized the fact that in a constantly changing market, increasing competition and well-thought-out and well-executed transactions in international mergers and acquisitions can significantly increase the value of their companies. M&A deals have a strong place in the policy of private companies as the main strategic tool for business development.
The main reasons why enterprises go for such transactions are:
- opportunities for further economic growth, cost reduction, increase in profits for a particular company under current market conditions are almost exhausted;
- the high tax burden on the enterprise;
- the real market price of the target company is predicted to be lower than its book value, that is, the combination of companies for the “invader” will be quite profitable;
- personal motives of the management of the absorbing company.
How to conduct business acquisition?
The acquisition is the acquisition by the acquiring company of at least 30% of the authorized capital – in the form of shares or shares – of the target company (the one that is being absorbed). Both parties to the transaction retain their legal independence. In this way, ownership rights are transferred to the new owner.
On average, the terms of a company acquisition are from 3 to 12 months. The organization of the merger is not limited to the definition of the structure, roles, and responsibilities of the participants in the process. It is important to set up all participants in the integration to receive the maximum value, the precise fulfillment of the tasks set. It is necessary to issue detailed plans to all employees, describe their tasks and goals, powers, and deadlines for solving problems, and ensure constant monitoring of the integration process.
The necessary element in this transaction is due diligence. It is the most effective tool that can reduce risks, protect the legal, financial, and other interests of the parties in agreeing. Legal due diligence of assets is accompanied by an analysis of the company’s position against competitors, an analysis of legal documentation, and financial statements.
Virtual data room – a digital background for M&A deals
Organizing M&A transactions includes a significant set of stages, each of which requires serious preparation of certain documentation. Thus, most companies use specially designed cloud-based data room solutions to automate these operations.
Virtual data room is a deal management system, namely a program or service in which you can draw up a phased universal sales plan and carry out each new transaction according to it. VDR is a useful tool during M&A transactions thanks to the following functions:
- improving executive discipline – the software simplifies the coordination of employees, which increases productivity, and the responsibility of personnel and personnel responsibility. The use of such software makes it easier to control the work activities of employees, allowing you to manage the workload;
- increasing the degree of data protection – the encryption module and the hierarchy of accesses in electronic storage files increase the security of enterprise documentation and prevent the leakage of confidential information;
- simplified collaboration – electronic document management simplifies the interaction between employees within the enterprise. Management verticals and horizontal connections between staff help to avoid negativity in the team and increase the corporate spirit.