How To Speed Up An M&A Deal

By Kevin Donovan

In the mergers and acquisitions arena, speed is crucial. An M&A transaction that moves too slowly often dies on the vine.

If a deal drags on beyond six months, it becomes more likely to fall apart with each passing day. In the delicate balancing act of an M&A deal, swift execution is essential to maintain momentum through close.

But it’s equally important not to rush through the process and skip due diligence, which can lead to stalls, torpedoed confidence and, ultimately, an empty bargaining table.

Here are just a few ways buyers and sellers can speed up an M&A deal so everything moves efficiently and all parties are left satisfied.

Do diligent pre-planning

In the lead-up to a merger or acquisition, a seller’s most powerful tool is preparedness, which ideally begins with getting all affairs in order before the M&A process even starts.

Thorough self-diligence and education on the process — even for those who don’t fully understand complex tax code — can significantly speed things up.

Serial entrepreneurs often excel at having a three- to five-year plan laid out from the moment they acquire a new asset. Think of an M&A plan as running in reverse: from the five-year mark to the close date. This mindfulness and early engagement with advisers set the stage for a swift transaction.

Identify critical attributes

During the planning phase, it’s important for sellers to identify and highlight the critical attributes of a business that will attract potential buyers. Are financial statements accurate and timely? Are the right accounting and finance resources in place? If so, they’re great selling points.

This phase is also about ensuring that business metrics like retention rates and KPIs are demonstrable and attractive. For example, a 98% customer-retention rate in a SaaS business is a significant selling point. Understanding and being able to explain margins and other KPIs can make a substantial difference in how quickly a deal can progress.

Sellers should also prop up the human element of the business. While strategic buyers might absorb a business’ processes and dismiss or eliminate the established team, financial buyers typically want a capable management team to remain and drive future growth.

A solid, competent team can instill confidence in buyers and keep the deal moving.

Have all materials ready to share

Preparation is about having all the proverbial ducks in a row. This means all parties should be able to provide requested information quickly and efficiently. Savvy sellers should flag and address potential concerns before they’re brought up by the buyer and be ready to move swiftly to provide transparent information about the business’ history.

A business that isn’t prepared to sell often struggles with understanding what needs to be prepared and disclosed. Once a buyer begins peeling back the layers of the onion, an unprepared business will inevitably begin to show more and more potential red flags to the buyer.

That’s where having readily available electronic files is also key. Sellers shouldn’t fall into the trap of providing a buyer with disorganized, out-of-date or irrelevant records. Keep things organized, digestible and searchable.

It will speed up the process exponentially, and avoid friction with a buyer who has better things to do than manually flip through reams of paper or 50 different Dropbox folders.

Be amenable to the process

The M&A process involves a lot of back and forth and a seemingly endless amount of ticking off boxes on both sides of the deal. Often a seller will take it personally when the buyer begins putting things under the microscope. Just roll with it — diligence, after all, is just good business.

It’s logical that buyers will want to do a thorough diligence of past business practices and ask questions. A seller becoming defensive or pushing back on requests doesn’t just create a potentially hostile negotiation, it can make it look like the seller is hiding something.

Sellers who address issues proactively and promptly will help keep things on track and moving toward both sides’ common goal: a smooth, speedy merger or acquisition.

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Kevin Donovan, CPA, is a partner at the Connecticut accounting and advisory firm Fiondella, Milone & LaSaracina LLP (FML CPAs).

Illustration: Dom Guzman