Inside The Deal: How The M&A Process Really Works

Knowing how the M&A process really works is crucial for entrepreneurs, particularly when planning their exit strategy. Faced with the possibility of an initial public offering (IPO), more founders now prefer a strategic M&A deal instead. However, several other factors may influence their decision.

Research shows that despite the economic uncertainties in 2025, around 51% of companies continue to pursue M&A deals. Restructuring their business models and integrating artificial intelligence (AI) to remain competitive are other factors driving their decisions.

Mergers and acquisitions (M&A) transactions are highly complex undertakings. You can expect the process to take anywhere from six months to several years. The size of the deal, the workforce of both companies, regulatory compliance concerns, and mutual understanding influence timelines.

You can also expect that geopolitical factors and financial considerations will impact how the deal progresses. Timelines aside, most mergers and acquisitions follow more or less similar steps. Here’s a quick overview of how the M&A process really works.

How the M&A Process Really Works?

The success of an M&A transaction largely depends on intricate planning and the development of a detailed framework. From the initial decision to merge with or purchase another company to the final integration, expect to navigate several different stages.

Careful planning and expert execution can allow you to leverage the complete benefits of the deal. These can include expanding the company by acquiring new capabilities and technology, and entering new markets. You’ll improve your market share thanks to strategic restructuring.

Gaining an edge over the competition, expanding your product portfolio, optimizing resources, and driving higher revenue are other advantages.

Start by Developing an Acquisition Strategy (~1 Week)

The first step in the process is developing an M&A strategy by identifying your objectives from the deal. Work with your board to create a game plan for what you hope to achieve. This strategy will help you maintain a laser focus when lining up the right targets for your acquisition.

You’ll ensure that your efforts align with the company’s mission and long-term goals. For instance, if you’re hoping to increase your market reach and presence, buying out competitors is the optimum approach. Accordingly, your team can compile a search criteria for potential targets.

These criteria can include geographical location, tactical advantage, customer base, financials, local market presence, and more. Consider retaining the services of a professional M&A consultant to help you streamline the process with end-to-end services.

The consultant can assist you with conducting a market analysis to determine ongoing and future market trends. You’ll also get help with understanding the industry’s ecosystem and identifying the right acquisition candidates that can drive significant value.

At this point, you should be clear about the regulatory environment, tax implications, and potential barriers to entry you’ll face. Also gather information about structuring the deal to derive maximum value from the transaction. Don’t overlook risk assessment to anticipate possible pitfalls.

Many companies choose to appoint a dedicated team to organize and manage the entire M&A deal. This panel will include competent members of the leadership and decision-makers who will run the process. The company, meanwhile, continues to operate as usual.

Researching the Market to Identify Acquisition Candidates and Initial Evaluation

Compiling a List of Acquisition Targets (1 to 3 Weeks)

This stage of the M&A progress involves scouting the market to identify viable candidates for the acquisition. You’ll assess them according to the criteria you’ve drawn up. Also begin planning the timeline and resources you need to allocate to the execution for legal fees and consultancy costs.

When selecting candidates, you’ll consider factors such as their financials, product portfolio, market reach, customer base, and potential for growth. Your objective here is ensuring smooth integration with your own company. With this perspective, the target’s culture is high on the list of priorities.

Most importantly, you’ll do your homework on the real reasons why the seller is interested in exiting the company. Look out for possible risks related to regulatory compliance, unclear ownership of intellectual property (IP), and more.

You’ll research the liquidity available in the company, profitability, and assets that you can integrate or sell. Also examine the team’s credentials for employees that are a great fit for your company. And, the ones you might have to let go.

When learning about how the M&A process really works, understand that these are just preliminary findings. The in-depth due diligence will follow after you’ve offered a letter of intent.

Initiating Negotiations (1 to 2 Weeks)

When company owners start looking for buyers, the standard practice is to draw up and release an Information Memorandum. This document contains adequate information for potential buyers so they can do an initial evaluation. But it does not include any sensitive or confidential information.

Interested parties can contact the seller for further negotiations. Your consultant will likely look for such Information Memorandums being floated and help you zero in on good candidates. You’ll use the financial data and other information to arrive at a preliminary valuation.

Buyers typically express interest with a ballpark figure of what they think the company is worth. The seller can then compare offers from different interested parties before moving forward with a specific buyer. Both participants in the deal then initiate an introductory conversation.

Keep in mind that storytelling is everything in fundraising, mergers, and acquisitions. In this regard, for a winning pitch deck to help you here, take a look at the template created by Peter Thiel, Silicon Valley legend (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that founders worldwide are using to raise millions below.

Conducting Basic Pre-Due Diligence

The parties next initiate basic pre-due diligence and the seller provides additional information to move the process along. Depending on the level of confidentiality necessary, the seller might also request the buyer to sign a non-disclosure agreement (NDA).

The financial analysts on the team start analyzing the basic metrics like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). They also look into its revenues, debt, and profits to assess its financial health.

A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is also a part of how the M&A process really works. The underlying consideration at every step is ensuring that the post-acquisition integration will be smooth and without hurdles.

At least 70% to 90% of M&A deals fail because of different reasons. A lack of integration is one of the primary factors. Pre-planning and covering your bases well in advance can prevent that from happening.

As for the timeline, if the target operates within your vertical and geographical location, completing this step takes a couple of weeks. More complex deals can take up to 6 weeks of pre-due diligence.

Negotiating the M&A Transaction (2 to 4 Months)

Now that you’ve completed a rudimentary analysis of the target company, negotiations can start. At this stage, most acquirers have adequate information and can create a valuation model. They are ready to offer a letter of intent (LOI), which is essentially a term sheet with an initial offer.

An essential aspect of the negotiations involves working out the legal implications of the deal. For instance, compliance with anti-trust laws and employment laws, as well as licensing and permit regulations. You might also need to get pre-clearance from the Office for Competition.

The seller takes their time examining the LOI and may also consult their legal team to iron out the nuances. The LOI includes information about the deal’s structure along with details about the value and sale of assets and stocks. However, this document is not legally binding.

Both participants understand that further negotiations can take place depending on the facts the due diligence uncovers. In case of any complications or roadblocks, the buyer may renegotiate the deal.

Once the negotiations stage initiates, you’ll draw up a budget and set aside funds to complete the purchase. Although the LOI mentions an approximate figure, it is open to further discussions.

A crucial aspect of your negotiations center around valuing the target company accurately. If you’re looking for more information about how to do that, check out this video I made. You’re to find it helpful.

Conducting Detailed Due Diligence (30 to 90 Days Depending on the Complexity)

Know that due diligence is a crucial aspect of how the M&A process actually works. Whether or not the deal will successfully close depends on the findings during this stage. Companies typically retain an entire panel of experts to delve into every aspect of the target and its operations.

The buyer’s due diligence is comprehensive and covers the target’s financials, intellectual property (IP) ownership deeds, and IT strategy. Expert analysts also go over the financials, assets, liabilities, debts, customer contracts, and team members’ credentials with a fine-toothed comb.

It is not unusual for the seller to also conduct due diligence of their own on the buyer’s company. They may be looking for assurance that the acquirer has the necessary funding to complete the sale. Then again, they may need validation that the buyer has the capabilities to sustain and scale the company.

On their part, buyers often secure their position in the purchase by requesting the seller to provide representations and warranties. These are failsafe measures designed to ensure that the transaction proceeds without hurdles.

The key objective behind due diligence is to identify potential risks that the buyer will take on post the purchase. The findings also pave the way for further negotiations in terms of pricing or other terms and conditions. It is up to you to thoroughly examine the target before closing the deal.

Accordingly, your team will go over employee contracts, data protection, insurance, regulatory and compliance issues, and clear intellectual property ownership. The target’s contractual, commercial, and operational obligations are also under scrutiny.

Once due diligence is complete, the parties can move on to the next phase, which is closing the deal. That’s how the M&A process really works.

Executing the Contract, Getting Regulatory Approval, and Closing (4 to 6 Weeks)

The next step involves drawing up the purchase agreement which includes all the relevant terms and conditions. You’ll negotiate the final price and payment terms as mentioned in the Share Purchase Agreement (SPA) or an Assets Purchase Agreement (APA).

Both parties also work out details such as warranties, indemnities, and any limitations that they add to the final contract. Once the legal teams have drafted the final version, you may need to seek regulatory approval from the concerned authorities. Your lawyers will advise you accordingly.

• Antitrust & Competition Laws:
  Anti-trust rules
  are designed to ensure the deal doesn’t create a monopoly or reduce market competition (e.g., U.S. FTC and DOJ, EU Competition Commission).
• Sector-Specific Regulation: Industries like banking, healthcare, defense, telecom, and energy often need additional regulatory clearance.
• Securities & Foreign Investment Rules:
  Public company deals may require SEC filings in the U.S., and foreign buyers may face review by bodies like CFIUS.
• International Jurisdictions: Cross-border M&A may trigger parallel reviews in multiple countries.

Larger transactions could potentially take longer to get regulatory approval and processing can take 6 months or more. Cross-border deals need filing in multiple jurisdictions which can again take longer to complete.

Once you get the mandatory approvals, the deal can proceed to the closing stage. The parties sign the definitive agreement and the transaction progresses to the integration phase.

Dealing With Post-Closing Issues and Executing the Integration (30, 60, or 90 Days)

Several mechanisms come into effect once the deal closes successfully. The seller transfers the shares or assets according to the terms of sale and completes other formalities. These may include obtaining consents, notifying the stakeholders, finalizing ancillary contracts, and training teams.

You’ll also initiate the most crucial phase of the acquisition–integrating the two companies to form a single entity. Most companies begin preparing for this phase as soon as they make the decision to enter into M&A deals. The first 100 days post-closing are the most critical for ensuring synergies.

Your integration team takes over from here, working with the teams to coordinate efforts. Their job is to ensure that the new company operates efficiently and achieves the objectives expected from the deal.

In Conclusion

How the M&A process really works involves a lot more grind than signing a contract. It is a strategic move that the participants in the deal plan in detail and execute with clarity and discipline.

Ultimately, the leadership and their direction can determine seamless execution and ensure the company continues to operate successfully.

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