Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises to join forces, identify and eradicate redundancies, agree on prices and strategy, and maintain employee productivity. One financial analyst referred to the process as trying to put together a 1,000-piece puzzle, except that your right and left hands have never worked together before. A successful integration should take between three to six months, although there are many hurdles that could trip up the process.
There is no official playbook on executing an M&A deal. Every involved party needs to navigate multiple steps before the deal can be realized.
The first step should be the development of a detailed growth/portfolio strategy. This can be thought of as the pre-M&A phase, and many deals get tripped up here. A growth strategy is a roadmap for future corporate development. Shareholders need a transparent outline, and future regulatory hurdles must be anticipated.
In the due diligence step, the messy valuations, accounting processes, policy reviews, market trends, and actual nuts-and-bolts of the deal are done. This is where the parties determine whether the financial aspects of the deal are going to work.
Integration focuses on delivering expected value and running through the new company procedures. Combining two companies doesn't make sense unless the end product is greater than the sum of two parts; deals are too risky, complicated, and expensive to just stand pat. This is the longest phase, and it should be the most deadline-oriented.
The riskiest part of a transaction is the execution stage. Every deal is unique, but all M&A deals could possibly run aground with the Securities and Exchange Commission (SEC), alienate stockholders or customers, or take too long and fall through.
The term "execution" is a bit of a misnomer because a fully executed deal is only the beginning of a successful M&A. Industry experts often advise that it can take between one and three years to synthesize and integrate the new company.