Mergers Acquisitions M&A Process

This guide outlines all the steps in the M&A process.

Overview of the M&A Process

The mergers and acquisitions (M&A) process has many steps and can often take anywhere from 6 months to several years to complete.   In this guide, we’ll outline the acquisition process from start to finish, describe the various types of acquirers (strategic vs. financial buys), discuss the importance of synergies (hard and soft synergies), and identify transaction costs. To learn all about the M&A process, watch our free course on mergers and acquisitions.


10 step M&A process list
10 Step M&A Checklist


10-Step M&A Process

If you work in either investment banking or corporate development you’ll need to develop an M&A deal process to follow.  Investment bankers advise their clients (the CEO, CFO, and corporate development professionals) on various M&A steps in this process.

A typical 10-step M&A deal process includes:

  1. Develop an acquisition strategy – Develop a solid strategy outlining why the business should make acquisitions, and what the desired outcomes are
  2. Set the M&A criteria – Set specific criteria such as company value, industry, country, revenue, margins, growth, employees, etc.
  3. Search for acquisition targets – Use the above criteria to filter opportunities, which can arise from in-bound interest, searching on Capital IQ or Bloomberg, or using bankers
  4. Begin acquisition planning – This step involves reaching out to selected companies that meet the criteria and commencing a dialogue with management
  5. Perform valuation analysis – Once preliminary discussions have taken place a target company will likely provide detailed financial information which can be used to value the company in more detail
  6. Negotiation – After a view on valuation has been established an offer can be made and negotiations will go back and forth
  7. M&A due diligence – Once an offer has been accepted it will be subject to due diligence, a process of confirming that all information about the target is accurate
  8. Purchase and sale contracts – Upon successful completion of due diligence the final purchase and sale agreement can be signed (share purchase or asset purchase)
  9. Financing strategy for the acquisition – This step may occur earlier, but the final strokes of financing will come into place after the deal has been signed but before it closes
  10. Closing and integration of the acquisition – Finally, the official transaction closes (tombstones are handed out) and the long process of integration begins


Structuring an M&A Deal

One of the most complicated steps in the M&A process is properly structuring the deal.  There are many factors to be considered such as: antitrust laws, securities regulation, corporate law, rival bidders, taxes, accounting issues, contacts, market conditions, forms of financing, and specific negotiation points in the M&A deal itself. Important documents when structuring deals are the Term Sheet (used for raising money) and a Letter of Intent (LOI).

To learn more, watch CFI’s free corporate finance 101 course.


M&A process deal structuring diagram


Rival bidders in M&A

The vast majority of acquisitions are competitive or potentially competitive. Companies normally have to pay a “premium” and this means having to offer more than rival bidders. To pay more than rival bidders, the company needs to be able to do more with the acquisition than the other bidders in the M&A process (i.e. generate more synergies or have a greater strategic rationale for the transaction).


Strategic vs Financial Buyers in M&A

In M&A deals there are typically 2 types of acquirers: strategic and financial.  Strategic acquirers are operating companies, often direct competitors or operating in adjacent industries where it makes sense for them to enter a new market.  Financial buyers are institutional buyers like private equity firms that are looking to own, but not operate the acquisition target.  Financial buyers will often use leverage and perform a leveraged buyout (LBO).

We discuss this in more detail in the M&A section of our corporate finance course.


Analyzing Mergers and Acquisitions

One of the biggest steps in the M&A process is analyzing and valuing acquisition targets. This usually involved two steps: valuing the target on a standalone basis, and valuing the synergies of the deal.  To learn more about valuing the M&A target see our free guide on DCF models.  When it comes to valuing synergies, there are two types: hard and soft.  Hard synergies are direct cost savings to be realized after completing the merger and acquisition process and soft synergies are revenue increases hoped to be realized after the deal closes. Learn more about the different types of synergies.


acquisition modeling process (valuation)


To learn more, check out CFI’s introduction to corporate finance course.


Careers Involved in the M&A Process

The most common career paths to participate in M&A deals are investment banking and corporate development.  Investment bankers advise their clients on either side of the acquisition, either the acquirer or the target.  The bankers work closing with the corporate development professionals at either company.  The Corp Dev team is like in-house investment banking and sometimes is referred to internally at the company the M&A team.  They are responsible for managing the process from start to finish.

To learn more, explore our interactive career map.


Watch a Video of the M&A Process

This short video explains each of the 10 steps outlined above. Watch and listen to an overview of how the process works.



More M&A Transaction Resources

We hope this has been a helpful guide and overview of the various steps in the M&A process.  CFI has created many more useful resources to help you more thoroughly understand mergers and acquisitions.

Our most popular resources include:

M&A Modeling Course

Learn how to model mergers and acquisitions in CFI's M&A Modeling Course! Build an M&A model from scratch the easy way with step-by-step instruction.

This course will teach you how to model synergies, accretion/dilution, pro forma metrics and a complete M&A model. View the course now!