Skip to content

Maximizing Results in M&A: The Critical Role of Consultancy Firms

  • by

M&A Consulting – That stands for Mergers and Acquisition Consulting. What exactly is M&A consulting? The duties that the M&A consultant are of an advisory nature to businesses. The area of M&A and, consequently, that of M&A consultants is wide. This covers as well acquisitions by companies, debt and mergers that are equity-financed spin-offs, carve-outs or partnerships between businesses. Our experts can explain exactly what the objectives and responsibilities are, and how you can get the most benefit from the M&A deal. In addition, the process and the most commonly used tasks you will need to perform in this field are described in greater in detail.

1. Intro to M&A Consulting

M&A consultants aid clients in every operational and strategic step that are related to an (potential) shift in their client’s company resulting from a merger, acquisition joint venture, takeover or IPO. In the era of increasing public markets’ M&A activities and the open IPOs, M&A consulting gained importance and now accounts for a significant portion of consulting services provided by the top consulting firms (e.g., Bain with the focus on work with PE funds and transactional advisory arm of Big 4 firms, M&A consulting boutiques).

The aim in M&A consultation is to offer a comprehensive strategy for portfolio management to ensure growth and profitability for the business of the client. This includes a broad range of consulting services. M&A consultants aid buyers in their search for best merger or acquisition candidates, create complicated divestiture or spin-off plans, assess the potential target’s business and pinpoint synergies that could be realized by pursuing M&A. Additionally, they aid transactions by calculating an acquisition slide and take care of every step in the process which include post-merger integration (PMI). Furthermore, M&A consultancies support the buyer side by looking for investors and buyers (e.g. as part of an exit strategy of owners or an investments fund) and ensuring a smooth and fair closing of the deal on behalf of the vendor.

2. What makes M&A Deals a Success?

In order to create an M&A deal a success, it is a need for not just the most extensive expertise but also a huge amount of expertise. It is crucial to look beyond the specific numbers. M&A consultants aid their clients to comprehend the significance behind the numbers and link them to international investors, experts in the field and other corporations around the world including takeover targets in order to maximize the value of the transaction. This is particularly important when dealing with complex arrangements (e.g. joint ventures, joint ventures) and other situations that require the greatest need for speed (fire sales) and ensuring the privacy of the entire procedure.

It is crucial to note that the likelihood of a successful deal depends on the amount of stakeholder involved on the consulting side. There is a constant need for deep, specialist understanding of areas ranging from business administration to tax law, to commercial law, and finance. It is not unusual for investment bankers, as well as many companies, including law and consultancy firms, to be involved in a single deal.

Furthermore an effective M&A deal demands a proper mediation between buyers and seller. An M&A consultancy often provides a valuable asset in negotiations by providing assistance to their clients on the most important arguments to bring up in meetings between the parties. A company doesn’t buy or sell its own assets!

3. M&A Process and Role of Consultants

There are some aspects of an normal M&A transaction that could be handled with M&A consultants:

M&A strategy
Market screening & outside-in deep dives
M&A process includes. due diligence, negotiation and closing of the transaction
Post-merger integration (PMI)

In the first place, consulting firms participate in the analysis possible strategic possibilities (incl. M&A) to help with the growth or exit strategy of the business. A M&A strategy is an ideal choice for a business based on the current market conditions and the firm’s specific circumstances. M&A opportunities (both buyers and sellers) is selected only when the buyer can benefit in terms of operationally, financial strategically, and operationally, while but at the same time, taking into consideration the risk associated with the transaction that is about to take place.

If M&A is selected to help with the company’s expansion or to exit The process of screening markets begins. Consultants search through both the databases of both public and private sources to determine the most effective buyers, investors and sellers (depending on the kind of transaction) which will meet the company’s goals. The companies that are shortlisted are then evaluated externally – consultants conduct more thorough analysis of the business model and the position in the market of those firms, and also to perform initial sizing of synergies that could be a possibility using publicly available information. Following this process, the shortlisted companies are invited to participate with an M&A process. The meetings with the interested party will be scheduled only for companies who have signed a confidentiality agreement.

This is the time when the M&A process begins. A typical component of the process used by M&A experts is due diligence which is an in-depth study of the company. In the M&A procedure, there may be different types of due diligence initiatives like financial, legal commercial, vendor, or due diligence. Based on investment assumptions, they are designed to discover important red and yellow signals for an investment and aid the valuation process in order to determine the price of the proposed transaction. Different scenarios for the company’s value are examined and evaluated because potential cash flows will be the primary factor in the final price since the sustainability of the company and future profits is the primary incentive for buyers. The value of the company is usually higher than that of the company’s assets which include software or hardware as they are the sole means to generate economic value. The most important distinctions in the price offered to the different parties depend on the expected return on investment and synergies that can be realized through M&A.

Then negotiations between the parties are conducted, and based on the agreement of a price and timeline M&A is completed. M&A consultants are usually involved in these processes through mediation services in order to prevent a stoppage. When the transaction is completed successfully after the merger, the process of integration begins. The process of bringing two companies together (buyer as well as seller) is usually a difficult and delicate process like medical surgery or the process of a transplant. Both companies typically have distinct operating systems and cultures. PMI seeks to bridge the gaps between the two companies and to standardize their operations to allow value capture for buyers. In addition the post-merger integration process is a goal that is ambitious in making synergies possible that were identified during the due diligence process, and ensuring that there is operationally ready company.

To summarise, the activity of M&A consultants essentially consists of the search for potential investors/buyers/sellers and advising its clients through the process of negotiations. This is accompanied by maintaining a high degree of discretion and confidentiality in order to prevent any disruption by external influences or financial losses to the parties involved. This is the reason M&A consultants are frequently being employed from corporate companies to make the process in order and lessen the possibility of it failing.

4. The Core M&A Consulting Services

As mentioned earlier, M&A consultants provide support in every step of an M&A process. They can assist in carve-outs and searches for companies to target valuation of companies and capital structure optimization identifying refinancing levers and the management of stakeholder relations. These elements can be separated into specific components of the consulting services offered by companies.

4.1 M&A Strategy

Blueprint examines M&A as a way to reach long-term strategic goals as well as the selection of target industries and areas that have the highest added value for the company, and the value chain that goes along with the economics behind it.

4.2 Valuation

Calculation of a final value range by leveraging different valuation techniques (such for e.g. discounting cash flow) and also comparability with public traded businesses or similar deals (e.g. by using sales as well as EBITDA multipliers).

4.3 Financial and Debt Advisory

The evaluation of the capability to service debt, as well as assessment of capital structure and liquidity could also cover the optimization of capital cost and the finding refinancing levers that can be sourced from other sources.

4.4 Company Sales (Inclusive of Vendor Due Diligence)

The preparation of the deal involves examination of the situation of the company as well as the selection and evaluation of bidders who could be interested, creation of an appealing equity story and the final negotiation of the indicative and binding bids.

4.5 company acquisition (Inclusive Legal, Financial, as well as Commercial Due Diligence)

The definition of the requirements in regards to the goals and process, assistance in searches and target valuation (incl. due diligence procedure) as well as support during negotiations and M&A closing.

4.6 Distressed M&A

Restructuring levers are used to come up with an independent business case for turnaround for distressed assets that includes. the exchange of debt with creditors in order to help restructure debt, with the follow-up of selling the assets to an investor outside the company or a strategic buyer.

4.7 Post-Merger Integration

Operational support to address most important success factors of the merger, and to mitigate risk (such for e.g. an unaligned management team, cultural conflict or slow process disrupting business and customers, and the lack of rigor for value creation) This process involves the planning and management of integration (PMO) as well as value capture as well as changing the operating model and culture.

5. Additional M&A Consulting Services

M&A consultants are usually involved in more complex projects, with complex arrangements to their customers. This includes IPOs and separations, as well as alliances and joint ventures.

First of all, IPOs or, in other words, public offerings require extensive preparation from the business who wants to be listed. M&A consultants assist companies in going public in a variety of ways:

Communicating and formulating a compelling strategy to increase the value
The development of plans for the public market, and determining the most appropriate IPO date and the best structure
The preparation for entry into the financial markets (including IPO project management, business plans valuations, financing strategies document listing, road-show and analyst presentations)
The development of capabilities is essential for long-term growth in the capital markets

Separations are also often necessary due to regulatory as well as strategic factors. Diversifications of specific segments of the business are usually complicated and are comparable to M&A and integration procedures. M&A consultants speed up and manage the process smoothly by helping with the definition of a divestiture strategy (incl. review of portfolios and establishing an equity store to facilitate the transaction) as well as carve-out and management (incl. the NewCo process design as well as management) as well as facilitation of transactions.

Finally, M&A consultants support clients in defining the strategic basis for partnerships and identifying the best partners. They also assist in the formation of an alliance (JV) or an alliance accordance with the desired goals and goals. In order to structure a partnership, consultants are required to assist with legal governance and governance set-up as well as operating model design and monitoring for the long-term. Less than 25% of JVs succeed in achieving all of their goals when they first start and nearly 70% of them face difficulties in the initial three years.