M&A Transactions – Performing Valuation and Due Diligence

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The M&A space is a constantly changing one. The motivations and structures of deals may change from year to year however one thing remains constant the amount of effort needed to conclude an acquisition. The most time-consuming elements of the process include valuation and due diligence.

M&A can aid companies in becoming more resilient and able to withstand difficult times. The strength of a group is more likely to survive in the changing global market than the weaknesses of a single entity. For example banks are utilizing M&A to safeguard their balance sheets by buying out struggling competitors such as Merrill Lynch.

M&A also allows companies to expand their product portfolio and to achieve economies of scale. A company that is based on technology, for example, might acquire a platform to expand the variety of products and services it provides its customers. This approach could also result in greater customer satisfaction, which in turn may boost the financial performance of the company.

The M&A process begins with a discussion of the high-level issues between the potential buyer and seller to determine the way in which their values are aligned and to determine the potential synergies. Due diligence involves operational analyses, financial models as well as a cultural fit evaluation. Due diligence can be an extended process. Therefore, the timeframe in the letter-of-intent (LOI) should be taken into consideration when planning this work. A key part of due diligence is conducting searches, including UCCs, fixture filings, federal/state tax lien, litigation, judgment liens bankruptcy, and intellectual property searches.

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