An M&A process in a nutshell (I): why good preparation makes all the difference

A successful M&A process (a merger or acquisition of one or more companies) requires more than just agreement on the price. In this blog series, we will discuss the key legal phases of an acquisition step by step: from the letter of intent and due diligence to warranties, indemnities, financing, the purchase agreement, and the period after closing. We will share practical insights from our daily practice, aimed at entrepreneurs, investors, and advisors who want to retain control over the acquisition process. In this first episode, we will focus on one of the most critical steps in the process: thorough preparation. 

A successful acquisition process actually begins well before anything is put on paper. In practice, the course of a transaction is often determined in the preparatory phase. It is precisely in this phase that the most important choices are made regarding strategy, structure, timing, and information provision. Those who underestimate this phase often face delays, renegotiation, or unnecessary risks later on.

Start with the question: why this transaction?

An acquisition usually begins with a strategic consideration. For buyers, it may be about growth, scaling, access to staff, technology, customers, or a new market. For sellers, the reasons are often different: succession or the lack thereof, focusing on core activities, a desired exit, risk diversification, or monetizing built-up value.

This underlying reason is not only commercially important. It also determines how the process should be structured. A seller who prioritizes speed often makes different choices than a shareholder who wants to achieve maximum price. A strategic buyer typically looks at integration and synergy differently than a financial investor. Therefore, it is wise to clearly formulate at the outset what the transaction should yield and what conditions apply.

Choose the right transaction structure early

An important first decision is the question of what exactly is being bought or sold. Is it the shares in a company or specific assets and liabilities? In a share transaction, the buyer generally acquires the entire business, including existing rights and obligations. This makes the transaction often relatively efficient, but it also means that historical risks remain within the company and are transferred to the buyer.

In an asset-liability transaction, the buyer can be more selective. However, this often makes execution more complex. Contracts may need to be taken over individually, employees may automatically transfer to the buyer, and permits or approvals must be reevaluated. The choice between these structures should therefore not only be approached from a tax or legal perspective but primarily from the intended result.

Make the business ready for sale

For sellers, preparing the business itself is at least as important as the subsequent negotiation. In many transactions, pressure on the valuation of the business arises not because the business is less attractive than thought but because documentation is found to be lacking. Think of missing shareholder resolutions, ambiguities regarding intellectual property rights, outdated employment contracts, oral agreements with customers or suppliers, or incomplete corporate housekeeping.

These types of issues almost always resurface during due diligence. A buyer will translate them into questions about risk, continuity, and ultimately price or contractual protection. A good cleanup round beforehand helps to keep the process manageable and limit surprises.

Consider the process: one-on-one or controlled auction?

Not every acquisition process unfolds in the same way. Sometimes there is one logical buyer or seller, for example, an existing relationship or even a competitor. In other cases, a controlled auction is chosen, where multiple interested parties are approached simultaneously. This can increase competition and strengthen the seller's bargaining position but also requires tight management.

A good process requires clear information moments, a logical and realistic timeline, a carefully arranged data room, and pre-defined roles for management and advisors. The better the management of the process, the greater the chance of successfully completing the transaction. 

Valuation is more than a price tag

During the preparation phase, discussions often arise about the value of the business. It is important to distinguish between enterprise value and the final purchase price. The purchase price is often adjusted later for items such as cash, debt, net debt, and working capital. The seller must take this into account, even in terms of expectation management. 

Also identify stakeholders in a timely manner

In an acquisition, usually more parties are involved than just the buyer and seller. Think of directors, shareholders, financiers, the works council, regulators, and sometimes key contracting parties. When they are brought into the picture too late, delays often occur in a process where speed is crucial.

Good preparation is therefore not a formality but an essential step in making an M&A process a success. Curious about how you can make your business transaction-ready or how a planned buy or sale can be best structured, we would be happy to think along with you.