Checklist for a Successful Corporate Transaction: Everything You Need to Prepare

A merger or acquisition (M&A) deal is a long process made up of different stages. It can sometimes even overwhelm buyers and sellers, which is why we're going to walk through the checklist you should follow for a successful M&A transaction in detail.

The checklist for a successful M&A deal

Initial planning stage

It all starts when an investor wants to acquire a new company or merge with another one to achieve a specific business goal. That is when questions come up about how and where to start.

1. Goals: the checklist for the initial stage should always start by defining the strategic goals: what do you want to achieve with the deal? If the aim is to buy a company, we need to ask ourselves what we're looking for. It could be increasing market share, diversifying the business, expanding internationally, buying out a supplier's business, and so on. Either way, the first step is to be clear about why you're doing it.
2. Partners?: in this first stage, you also need to identify and evaluate potential acquisition targets or merger partners. In other words, determine whether the deal will involve buying a company or merging with another one. Again, it comes back to what you want to achieve with this M&A process.
3. Market analysis: finally, you need to carry out a market and competitive analysis. That means understanding the state of your market niche and the effect the M&A process would have on the industry. You should also study where the main competitors stand, taking their strengths and weaknesses into account, so you can identify the areas that can be strengthened after the merger or acquisition.

Due diligence stage

1. Financial due diligence: this stage should start by reviewing the target company's financial and accounting position. This is what is known as financial due diligence. It lets us understand the company's real financial condition, so we can avoid potential risks and arrive at a better valuation of the business.
2. Legal due diligence: beyond understanding the financials, it is also essential to assess legal, regulatory, and contractual risks. The legal aspects of acquiring a company are even more important than the financial ones, because if any law is broken, the M&A process would be pointless. On top of that, you need to know the company's legal situation and whether it has, or has had, any open disputes, complaints, or investigations. That is what legal due diligence is for.
3. Company culture: finally, this second stage also requires you to analyze the organizational culture and operational compatibility. In other words, understand how the company works in order to gauge how compatible it is and how it can adapt to a new scenario.

Negotiation and structuring

1. MOU or LOI: this is where the main foundations of the agreement are laid, starting with drafting a memorandum of understanding (MOU) or a letter of intent (LOI). This preliminary document formalizes the parties' interest in reaching an agreement and can be binding or non-binding. Its main purpose is to structure the discussions and align expectations from the start of the negotiation, setting a clear roadmap for the process.
2. Structure: next, you need to design the optimal financial and tax structure. That is, what the new company will look like and how it will be organized. It may simply be integrated and absorbed into the parent company, or it may operate as a separate company while depending on another. You need to find the best formula, and for that it helps to work with advisors who specialize in tax.
3. Transaction: this step is about defining the key terms of the transaction (price, payment method, etc.). This is where the contract is drawn up, all the clauses are included, and the critical points are settled. It is the last stage before the agreement takes effect.

Execution

1. Contract: now that the process has been defined on paper, the next step is to prepare the final legal documents (purchase agreement, contracts, etc.). At this point, the parties are already in agreement and the contract has been drafted; what remains is to finalize it so it complies with regulations before it takes effect and is executed.
2. Regulatory approval: of course, at this point it is essential to obtain regulatory and stakeholder approvals. The regulator must sign off on the M&A process; otherwise, everything done so far could fall apart and you would have to start over.

Final or post-closing stage

1. Restructuring: Once the deal has been executed and the acquisition or merger is a reality, the next step is to develop an integration and restructuring plan. This means deciding what will happen to the employees of both companies, how departments will be merged, what the new way of working will be, and so on.
2. Communication plan: at this final point, you also need to implement internal and external communication strategies to make sure everything is communicated properly, since the new scenario affects all employees as well as the company's own production chain.
3. Monitoring: finally, you need to track performance and post-integration goals. Knowing whether goals are being met is not only necessary for the company to run smoothly, but also because the contract may include a clause tied to them.