M&A Transactions – Performing Valuation and Due Diligence

The M&A market is constantly changing. The motivations and structures of deals may change from year to year but one thing remains constant that is the amount of work required to complete the transaction. The most time-consuming elements of the process are the valuation and due diligence.

M&A can make companies more resilient and able to endure difficult times. The strength of a combined company is more likely to last in a changing world than the weaknesses of a single entity. For instance, banks are using M&A to protect their balance sheets by buying out struggling competitors, such as Merrill Lynch.

M&A can also help companies increase their product offerings and to achieve economies of scale. For instance, a tech company might acquire an online platform provider to expand the range of products and services it offers customers. This can also improve customer satisfaction, which may enhance the financial performance of the business.

The M&A process begins by having a high-level conversation between the prospective buyer and seller to evaluate how their values align and to determine the potential for synergies. Due diligence involves merger partner operational analyses, financial models as well as a cultural fit evaluation. Due diligence is an extended process. Therefore, the timeline in the letter-of-intent (LOI) must be considered when planning this work. One of the most important aspects of due diligence is conducting search, including UCCs fixture filings, federal/state tax liens, lawsuits, judgment liens, bankruptcy, and intellectual property searches.