M&A allows businesses to expand geographically, gain an advantage over competitors, and access to new technologies, employees, or assets. However, M&A is also a time-consuming and intensive process. There are months of time spent evaluating potential target companies with formal due diligence, which entails an exhaustive study of the company’s information – financial, commercial and operational. It is more difficult to succeed when a company is located remotely in the same manner, since similar steps must be followed but with added difficulties in collaboration and communication.
Preparing for Day One
When a company gets acquired, the first day of operations (known in M&A terminology as “Day 1”) must be planned. This involves setting up organizational structures, integrating IT systems and other back-office infrastructure and communicating with staff about the way things will operate going forward. The M&A team must also ensure that all key documents are easily accessible, such as legal agreements, contracts, and financial models.
Building a shared Vision
Understanding the similarities and differences in the culture and business goals between the parties is essential to the success of an M&A strategy. This is particularly crucial when businesses are buying or merging remotely. A new company without a clear vision may lose its direction, and create friction in the workplace.
M&A is a high-risk process that often leads to unintended consequences. In particular, the sunk cost fallacy can force M&A decision makers into traps that lead to agreement, where they agree to an agreement that is more costly than the best alternative.
