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

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
  2. Set the M&A criteria (i.e. company size, industry, country, etc.)
  3. Search for acquisition targets
  4. Begin acquisition planning
  5. Perform valuation analysis
  6. Negotiation
  7. M&A due diligence
  8. Purchase and sale contacts
  9. Financing strategy for the acquisition
  10. Closing and integration of the acquisition

M&A Process


Rival bidders in M&A

The vast majority of acquisitions are competitive or potentially competitive. Companies normally have to pay a “premium”. Companies normally have 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.


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.

Acquisition process

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


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 our free corporate finance 101 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.


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: