5 Key Considerations in Effective Mergers & Acquisitions

Written by Darren Van Zyl
July 21, 2022
Share this

Advisory, Business Value, Valuations, video

Merger and Acquisition transactions can lead to significant growth opportunities for both the buyer and seller however these transactions also come with substantial risks.

Unfortunately, there are business owners who miss the chance to maximise their sale value because they lack understanding and experience with the process. They also fail to recognise the key considerations to minimise any risk areas before an M&A transaction commences. This usually comes down to either poor planning, not seeking the right advice, or rushing the transaction for fear of losing the deal.

So how can you mitigate any potential risks and maximise the value of an M&A transaction? Let’s take a look at 5 key considerations that you should consider to allow a smooth process that ensures your business maximises the value of an M&A transaction. Watch the full video below.


Understand the value of your business and test that against your desired outcome


Understanding the true value of your business and comparing that against your desired outcome is the first thing to consider. Quite often, business owners have a perception of what their business is worth which can be vastly different to the market value at the time.

Getting a proper business valuation done before the sale process begins is important to understand what you’re selling, what is the right price, and what your walkways are.  Having a comprehensive strategy on these matters gives you a clear indication of what you could be walking away with at the end of the transaction.

This ensures no nasty surprises at the end of the sale and provides you with the confidence you need going into the negotiation process.


Get the non-negotiables sorted


The second key consideration is to get YOUR non-negotiables sorted upfront.

This is an important part of the negotiation process, and again, gives you more confidence before even going into the sale process.

Have an upfront conversation with your prospective buyer to discuss, understand, and agree on any non-negotiables and dealbreakers so you can settle them right away.

Sometimes, we find sellers who have already gone through most of the process and prepared all the necessary documentation, but the sale falls through because they have not identified all their non-negotiables first.

Clearly understanding the terms of the transaction and resolving any deal breakers before starting the transaction, will increase the likelihood of a successful transaction.


Work with a specialist to prepare the right financial documentation beforehand


No one; buyer or seller, should be going into a deal without all the right documentation prepared and completed beforehand. Working with a specialist is an investment, yes, but it could save you money at the end of the deal.

For example, working with an accountant helps identify issues in your business’s financials and provides effective strategies to resolve any issues beforehand.

Simply put, the more you invest in working with a specialist in M&A transactions from the start, the better the quality of information and documentation you get, and the lower your risks will be.


Simulate the transaction and confirm what’s in and out to clarify your net proceeds


Another key consideration is to simulate the transaction and confirm what’s in and out to clarify your net proceeds.

As I mentioned before, understanding the real value of your business gives you a better expectation of what you can receive from selling your business.

So, it’s important to know what you’re actually selling. This sounds like an obvious argument, but it’s not as simple as many business owners may think.

Does the price offered to you include all assets of the business? How much are your proceeds from the deal after all the taxes, debt and transaction costs have been paid?

For example, if your house is worth $1 million, and you have a $1 million loan, your equity value is nil. In addition, it cost you $30,000 in commission to sell your house. You can see from this example that despite selling for $ 1 million, we are out of pocket by $30,000. It can be a similar scenario when selling your business.

So, it is important to assess whether your net proceeds are favourable after the tax, debts, and all costs are settled.


Know the process


Finally, and the most obvious consideration in an M&A deal, is to know the process.

Selling or buying a business is a complex process and as such, trying to take shortcuts by skipping steps in the process introduces too much risk for all parties.

Do your research or talk to an advisor and be crystal clear on the M&A process to ensure you’re mitigating potential risks, avoiding any surprises on both ends, and maximising the outcome of the deal.

All of these key considerations are important for an effective M&A transaction. It can become quite an overwhelming ordeal; but if you take the time to know, in detail, how it all works, you can minimise your risks and maximise the value of the transaction.

As the seller, you need to take control of the deal and make sure you’re not being rushed through the process for the fear of losing the sale. Get all your ducks in a row first and make sure you understand the ins and outs of the process you are about to go through.

If you’re planning to sell your business, whether now or in the future, our specialist M&A team have developed a process that is designed to drive the highest level of probability of a transaction occurring and ensure that our clients’ exit value is maximised. Email us today at admin@elementsag.com.au or give us a call at 07 3878 9181 for an initial upfront consultation.

Subscribe to our newsletter.


Related insights

The firm

About us

Our team


How we help

All services

Business Advisory & Valuation

Bookkeeping & Management Accounting



Events & Webinars

Free Resources

Our clients