Last updated on Aug 20, 2024

What are the key steps to execute a successful deal?

Executing a successful deal in corporate finance requires a combination of strategic, analytical, and interpersonal skills. Whether you are buying, selling, or merging a business, you need to follow some key steps to ensure a smooth and profitable transaction. In this article, we will outline the six main steps to execute a successful deal and provide some tips and best practices along the way.

1 Identify your objectives

The first step to execute a successful deal is to identify your objectives and motivations for the transaction. What are you trying to achieve by buying, selling, or merging a business? How does the deal fit into your overall strategy and vision? What are the benefits and risks of the deal for your stakeholders, customers, and employees? By answering these questions, you can define your criteria and expectations for the deal and communicate them clearly to your team and advisors.

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Ömer F. Güven, CFA

Founder Fintalent.com - Interim M&A, PMI, Transformation Freelance Platform.
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As M&A leader, there's always one central question that needs to be answered: How does this deal tie back into the overall strategy? And to achieve that, Post-merger Integration needs to be a part of the equation. A deal without proper integration will not create any value at all. Any objective needs to include ideas on how the synergies will be created after the deal is closed.

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2 Conduct due diligence

The second step to execute a successful deal is to conduct due diligence on the target or potential partner. Due diligence is the process of verifying and evaluating the financial, legal, operational, and strategic aspects of the business you are interested in. You need to gather and analyze relevant data and documents, such as financial statements, contracts, assets, liabilities, customers, competitors, and market trends. You also need to assess the culture and values of the business and how they align with yours. Due diligence helps you to identify any red flags, risks, or opportunities that may affect the deal value and terms.

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3 Negotiate the deal terms

The third step to execute a successful deal is to negotiate the deal terms with the other party. The deal terms include the price, structure, financing, timing, and conditions of the transaction. You need to have a clear understanding of the valuation methods and assumptions used by both sides and how they affect the deal price. You also need to consider the tax, legal, and regulatory implications of the deal structure and financing options. You need to balance your interests and goals with those of the other party and find a mutually acceptable solution. Negotiating the deal terms requires effective communication, collaboration, and compromise skills.

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Joseph Oddo

Mergers & Acquisitions Advisor Connecting Business Sellers with Qualified Buyers | Providing Full Service Exit Strategy for Mid-market Business Owners
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It may not be that appealing for a seller to consider an earn-out as part of the deal structure, but it does present confidence in the ongoing success of the business and may turn into a winning boast of earnings for the seller. Most deals start with a suggested structure that will include an seller note. Again, to project confidence in the ongoing viability of the business enterprise, the seller may be willing to offer say a deferment of 20% of the purchase price at an 11% interest rate. Many buyers will choose other sources for that note at a lower interest rate. However, perceiving higher risk, the buyer may ask for an earn-out, good idea as long as the seller is also rewarded a royalty for earnings that go above projections.

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4 Prepare the deal documents

The fourth step to execute a successful deal is to prepare the deal documents that formalize the agreement between the parties. The deal documents include the letter of intent, the purchase agreement, the disclosure schedules, and any ancillary agreements. The deal documents reflect the deal terms and conditions and contain the representations, warranties, covenants, and indemnities that protect the parties from potential liabilities and disputes. You need to work closely with your legal advisors and consultants to draft, review, and finalize the deal documents and ensure they are accurate and comprehensive.

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5 Execute the deal closing

The fifth step to execute a successful deal is to execute the deal closing. The deal closing is the final stage of the transaction where the parties sign the deal documents, exchange the consideration, and transfer the ownership and control of the business. The deal closing requires careful planning and coordination between the parties and their advisors, as well as the involvement of third parties, such as regulators, lenders, and escrow agents. You need to ensure that all the closing conditions are met, all the closing deliverables are ready, and all the closing formalities are completed.

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6 Manage the post-deal integration

The sixth and final step to execute a successful deal is to manage the post-deal integration. The post-deal integration is the process of combining and aligning the operations, systems, processes, and cultures of the merged or acquired businesses. The post-deal integration is critical for realizing the synergies and value creation potential of the deal and ensuring a smooth transition for the customers, employees, and stakeholders. You need to have a clear integration plan and governance structure, as well as a dedicated integration team and leader. You also need to monitor and measure the integration progress and performance and address any issues or challenges that may arise.

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Ömer F. Güven, CFA

Founder Fintalent.com - Interim M&A, PMI, Transformation Freelance Platform.
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A common mistake that I see is that post-merger integration (PMI) is merely an afterthought that business units should take care of after M&A hands over the deal. That won't work! Integration needs to be considered from the get-go to make a deal a success.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Umair A., ACA

Manager Deal Advisory | Financial Modeling, Valuation, Pitch Decks, M&A | xKPMG | 11+ years
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For a deal to be a success it first needs to be good enough. You might get the investor’s attention with various things but if the deal is not lucrative then chances are at some point something will happen and the investor will back off. Even if you have done everything else to perfection.

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What are the key steps to execute a successful deal?

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1 Identify your objectives

2 Conduct due diligence

3 Negotiate the deal terms

4 Prepare the deal documents

5 Execute the deal closing

6 Manage the post-deal integration

7 Here’s what else to consider

Corporate Finance

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