The merger and acquisition process, from start to finish

Mergers and acquisitions are common in the business world, as companies look to drive growth or enter new markets. They’re often used to gain technology or skilled personnel, or are used as defensive manoeuvres to reduce competition.

If your company is exploring the possibility of entering into a merger or acquiring another business (or being bought yourself), you’ll need to know how the process works.

In this comprehensive guide, we’ll be running through the merger and acquisition process from start to finish. This includes all of the steps involved, from developing a strategy right through to closing a deal.

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The 12 steps of the merger and acquisition process

Mergers and acquisitions can differ depending on the parties involved, and the purpose of or motivation for the transaction. But most tend to follow a similar roadmap, and this is what we’ll be exploring below.

The main steps of a merger and acquisition process include the following:

1. Developing a strategy
2. Exploring financing options
3. Searching for potential acquisition targets
4. Initial conversations
5. In-depth valuation analysis
6. Offers and negotiations
7. Structuring the deal
8. Due diligence
9. Signing contracts
10. Finalising financing
11. Closing the deal
12. Merging and integration work begins

1: Developing a strategy

The first and arguably most crucial step is to develop an acquisition strategy. This means setting goals for the deal, outlining in detail what you expect to achieve by merging with or buying another company.

Some of the most common goals include:

• Eliminating competition (by merging with or acquiring a key competitor), to achieve a stronger market position and increase market share
• Expanding into new geographic markets
• Offering a new product or service through an acquisition. Diversifying product lines or business operations can also can help to spread risk across different areas
• Quickly gaining access to unique technology, patents and other resources
• Gaining a skilled workforce or specialist expertise
• Financial benefits - including tax benefits, economies of scale and improved financial capacity.

Alongside setting goals for the transaction, a strategy should also set out how the acquisition or merger will be achieved - and what needs to be in place in order for it to happen.

2: Exploring financing options

At this early stage, the company should consider options for financing the acquisition. Common sources used for M&As are cash reserves, debt (such as bank loans or lines of credit) and equity (such as issuing new shares, or stock swaps). It’s also common practice to use a mix of these in the form of leveraged buyouts, seller financing or mezzanine financing.

3: Searching for potential acquisition targets

The next step is to outline the key criteria for a suitable acquisition target. This may be geographical location, customer base, profit margins or a mix of these, depending on the main goals of the project. This will enable targets to be selected, evaluated and shortlisted.

4: Initial conversations

At this stage in the process, the acquirer will aim to make contact with target companies on the shortlist. Initial conversations will begin, with the primary aim of identifying which targets would actually be amenable to a merger or acquisition.

Another key goal is to gather information about the company, its leaders and its finances.

5: In-depth valuation analysis

If early-stage talks go well, it’s now time for the real work to begin. Research is absolutely essential to a successful merger or acquisition. You need to know as much as possible about the target company and its board of directors, as well as its finances, products, goals and everything else you can find out.

The last thing you want is an unpleasant surprise or disclosure just before you’re about to close the deal - or after.

At this stage, the acquirer will typically ask the target company to provide substantial information - usually relating to the financials of the business. This information can be analysed, to check that the business is suitable for acquiring/merging and to come up with an accurate valuation.

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6: Offers and negotiations

As part of the valuation analysis process, the acquiring company should have multiple valuation models ready for the next stage - offers and negotiations.

As the acquirer, you’ll be constructing and putting forward what you believe is a reasonable offer. This will be based on all of the information you’ve gathered so far, as well as factoring in the value of the target company for your business.

This offer will be presented to the other party, and discussions and negotiations on terms can take place.

7: Structuring the deal

One of the most difficult and complicated parts of the M&A process can be structuring the deal. Not only is it necessary to draft detailed terms that both parties can agree on, but there are a huge range of other factors to consider.

These include:

• Rival bidders
• Tax implications
• Corporate law
• Market conditions
• Securities regulations
• Antitrust laws
• Forms of financing.

Every negotiation point will need to be discussed in detail, before it can be agreed upon and included in the Term Sheet for the deal

Brokering a deal between companies located in different countries can add extra layers of complication. This is due to the differences in corporate and tax law in different jurisdictions, as well as the complexities of currency exchange.

Specialist legal and other professional advice will be essential to navigating these challenges and ensuring the deal goes smoothly.

8: Due diligence

The next step is due diligence, but these two words actually refer to an exhaustive, time-consuming and extensive process.

Specialist solicitors will delve into every aspect of the target company’s operations, analysing everything in granular detail. They'll examine the company’s financials, assets and liability, human resources, customers, patents, technology, market position, leadership structure and much, much more.

The aim is to confirm that the acquiring company’s valuation is correct, and to root out anything which could sour the deal or affect the valuation.

At this stage, any problems, concerns or discrepancies will need to be addressed before the transaction can proceed.

9: Signing contracts

With the offer accepted and extensive due diligence processes completed, it’s now time for a final sale contract to be drafted.

Legal experts are heavily involved at this stage, to make sure every detail of the contract passes legal requirements and is exactly as agreed between the two parties.

There are a few different types of purchase agreement used for mergers and acquisitions. These include Asset Purchase Agreements (APAs), Share Purchase Agreements (SPAs) and Merger Agreements. A crucial step will be to finalise which of these agreement types will be used, if not already decided when putting together the structure for the deal.

10: Finalising financing

In order to work towards closing the deal, the acquiring company now needs to finalise their financing arrangements. This typically happens once the purchase and sale agreement has been signed.

Options will have been explored in detail much earlier in the M&A process, but this is the time to put a detailed plan in place and check that the sums add up.

If there’s an issue (such as the bank withdrawing a loan offer, for example), then an alternative solution will need to be found. This needs to happen quickly, to avoid compromising the deal.

11: Closing the deal

With all the hard work done, it’s now time to close the deal. There’s typically a final flurry of activity at this stage, as last-minute checks are carried out and key documents signed.

The main pre-closing tasks include:

• Fulfilling pre-closing conditions, agreed as part of the signed purchase agreement
• Preparing and signing final legal documents
• Obtaining regulatory approval and any other required consents
• Arranging for the transfer of funds
• Legal steps for the transfer of ownership, including the transfer of shares and assets.

Once every box has been ticked, the deal is closed and the merger or acquisition complete.

12: Merging and integration work begins

The deal may be closed and the process complete, but there’s one other crucial stage that needs to happen before business as usual can be resumed. This is implementing the integration plan to combine the two companies, a process that needs to happen as smoothly as possible.

This may involve:

• Integrating business systems, such as IT infrastructure and software
• Completing the transfer of domain names, social media accounts, intellectual property and other remaining assets
• Executing a communications strategy to inform and educate employees, customers and key stakeholders about the changes
• Managing real estate
• Completing tax and legal registrations, and updating legal and public records
• Addressing employment law issues, such as adjusting employment contracts, pensions and benefits. Staffing changes may also happen at this stage, which could mean managing redundancies or changes of role.

Post-closing activities can go on for some time, as the newly merged company experiences a period of adjustment. It’s a good idea to have a strategy and a timeline for this, so that everyone knows what needs to happen when, and to help the process run smoothly.

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sources used: N/A

Sources last checked 24-Oct-2025