M&A What is the Merger and Acquisition process step by step?

Mergers and Acquisitions processes require the understanding of the Commercial Companies Code, as well as appropriate analytical, legal, and financial preparation. Therefore, entering the M&A market always requires the work of numerous experts, precise planning, and meticulous management of each stage. What exactly is the M&A process, and how does it work?

In short:

• Mergers and Acquisitions allow companies to grow rapidly, gain competitive advantages and leverage synergies between organizations.
• The process includes strategic analysis, initial discussions, business valuation, Due
• Diligence, negotiations and transaction finalization.
• It is crucial to look at the stage from a legal, economic, operational and tax perspective to properly analyze risks and opportunities.

Success is determined by good integration, proper process management and the support of experts and tools such as Virtual Data Room, which help speed up and organize activities.

A Merger involves combining two entities into a single economic entity, while an Acquisition occurs when one entity takes control of another company by purchasing its shares or stock. Companies are increasingly turning to the M&A process to grow, gain competitive advantages, and accelerate expansion.

In practice, every Merger or Acquisition transaction is strategic in nature and can have a significant impact on market structure – from the technology industry to the financial and industrial sectors. Whether the goal is to acquire new competencies, achieve cost synergies, or diversify operations, a well-executed Merger or Acquisition process can completely transform a company’s position.

The decision to merge or acquire (or be acquired) rarely stems from a single reason. It’s usually the result of an analysis in which management assesses how a given move can expand the company’s potential, scale, and market position. The most common motivation is synergy: the ability to combine resources that together deliver greater operational and financial efficiency than separately. For many organizations, a transaction is a way to quickly enter a new industry or market, or to strengthen a competitive advantage.

Economic and capital considerations also play a significant role. Companies seeking to accelerate growth without having to build everything from scratch often acquire an entity already operating in a given segment. This strategy allows them to immediately leverage the resources, customers, and technologies of another company.

Legal and tax factors are also important. A properly planned transaction structure can optimize costs, facilitate financing, and mitigate tax-related risks. Therefore, before making a decision, management boards often seek professional advice to understand how to best conduct the entire M&A process.

So, how does the M&A process work?

The first step is to assess whether a Merger or Acquisition is the right path for a given company. The management board analyzes the strategic goals, economic situation, and market environment. It’s important to determine whether a potential Merger or Acquisition will realistically increase the company’s potential, as well as whether synergies can be achieved in operational, technological, or sales areas.

Once a path is chosen, initial discussions between the seller and the buyer take place. The parties sign an NDA and begin sharing initial data to assess whether a full M&A process is worthwhile. This phase examines the compatibility of both companies’ business models, the potential cost of integration, and any legal or tax obstacles.

At this stage, specialists (i.e. external advisors) prepare a preliminary valuation of a given company, analyzing its economic situation, profitability, liquidity, and capital structure. The goal is to determine the real value of the shares and assess whether the planned transaction is profitable.

A preliminary analysis also allows for the identification of key financial risks and the potential for synergies. This is the point at which the buyer decides whether to continue the process, and the seller can prepare for more detailed questions and request additional documents. A solid valuation significantly influences the negotiations and the final structure of the entire process.

Due Diligence is the most demanding part of the Merger and Acquisition process. Experts analyze legal, economic, operational, and tax-related issues. The goal is to fully verify that the information provided by the seller is complete, accurate, and does not conceal any unexpected risks.

The following are subject to verification:

• organizational structure and trade agreements
• the assets of all merging companies
• employee and operational situation
• data security and obligations
• tax settlements

In this step, professional advice and technological tools that help manage documentation are crucial, such as the Virtual Data Room, which significantly speeds up the procedure and increases security.

Once Due Diligence is complete, the parties move on to determining the final transaction structure. This stage determines whether the best solution will be a traditional Acquisition, a Merger through the formation of a new company, or a model in which the acquiring company absorbs some of or all the assets of the target company.

Once the structure is agreed upon, finalization occurs, meaning the signing of the relevant agreements. In the case of limited liability companies, formal registrations must usually be filed with the registry court. Only after these are legally approved does the Merger or formal Acquisition take place.

Finalizing the agreement is just the beginning of the practical steps. After a Merger or Acquisition, implementing an integration plan that encompasses operational, technological, organizational, and cultural areas becomes crucial. This is where most of the expected synergies are realized, and how companies manage change often determines the success of the entire transaction.

Integration includes:

• unification of processes and tools
• connection of teams and structures
• data and systems migration
• updating documents in accordance with regulations
• verification of the impact on costs and taxes

A well-planned and efficient implementation allows businesses to fully leverage their potential, streamline their operations, and accelerate synergy. This is where technology, such as Virtual Data Room tools, play an increasingly important role, helping transaction sides maintain document order and securely manage information.

What is the Merger and Acquisition process?

The Merger and Acquisition process is a type of transaction leading to joining together two or more separate companies, that includes strategic analysis, preliminary discussions, business valuation, Due Diligence, negotiations, contract finalization, and integration. Each stage impacts the security and effectiveness of the entire transaction.

How long does a company takeover or Merger take?

The duration depends on the complexity of the structure, the scale of the business, and the number of areas being analyzed. Typically, the process takes several months to a year, with Due Diligence and the post-acquisition integration phase taking the longest.

What role does Due Diligence play in the M&A process?

Due diligence is a stage in which experts review all aspects: legal, economic, operational, tax, and other. The goal is to identify risks and verify the assets of all merging companies. The results of this analysis have a significant impact on negotiations and the share price.

How does Virtual Data Room help in the Mergers and Acquisitions process?

VDR significantly accelerates and streamlines the M&A process. It enables secure documentation management, access control, data sharing across teams, and Due Diligence in a structured manner that complies with legal and tax requirements. This makes the entire process more efficient and transparent.

What determines the success of a Merger or Acquisition?

The most important factors are: proper market analysis, realistic valuation, precise transaction structure, good professional advice, and effective post-closing integration. It is also crucial that the parties clearly define their goals and expected synergies from the outset.