Mergers and acquisitions (M&A) can change a business for growth, entering into new markets, or gaining a competitive advantage. However, with high rewards comes high risk. Research suggests that approximately 70-90% of M&A transactions are unsuccessful in achieving their intended goals. This is due to insufficient transaction support, which is an integrated set of strategic, financial, legal, and operational services that assist in evaluating, structuring, and executing deals.
In this blog, we will discuss the importance of transaction support within the M&A lifecycle, its primary components, and its role in boosting value while minimizing risks.
Transaction support deals with advisory and due diligence services during the entire process of mergers and acquisitions, divestitures, and joint ventures. It includes financial, tax, legal, operational, and IT assessments that inform buyers and sellers and help avoid surprises after the deal is complete.
Unlike legal reviews or audits, transaction support focuses on the deal. It focuses on integration challenges, financial concerns, cultural mismatches, and compliance hurdles that could impact the success of the transaction.
Due diligence is the first step in any transaction support activity. It consists of reviewing a company's financial reports, its assets and liabilities, cash flow, legal standing, IP, contracts, customer relations, and more. This helps the acquiring company:
Determine possible deal-breakers or hidden liabilities.
Confirm the estimated value of the target.
Recognize working capital needs.
Evaluate past and future earnings.
The process is more insightful when performed by experienced professionals who provide transaction advisory services, as these experts bring in deeper insights, industry benchmarks, and strategic foresight, which enable smarter decisions and mitigate post-deal shocks.
A transaction support specialist assists businesses in understanding if the offered deal price matches the target company’s true financial condition and future potential value. They conduct scenario modeling, valuation comparison, and forecast analysis, which aid in accurate pricing and better deal structure.
Transaction support also assists in customizing payment methods. These could be payments through cash, stock, earnouts, or debt instruments, predicated on risk-sharing and tax-saving techniques.
One important yet often ignored part of M&A transactions is tax structuring and regulatory alignment. Improper tax structuring can result in costly post-deal complications or even legal issues.
To support optimization, transaction support teams ensure:
Efficient tax structures that lessen tax liabilities.
Adherence to local and global taxation frameworks.
Complying with the rules of the particular industry.
Compliance with antitrust, employment, and foreign investment regulations
For complex cross-border transactions or industry-specific rules, they collaborate with legal and compliance experts.
A transaction may look good at first glance, but true success depends on how well an organization’s systems and technology integrate with each other. Transaction support involves:
Analyzing the effectiveness and scalability of the supply chain.
Evaluating human resources and talent management systems.
Assessing IT, cybersecurity, and ERP systems.
IT, cybersecurity, and ERP systems alignment.
Ensuring cultural and organizational fit.
This greatly assists in developing a post-merger integration (PMI) strategy that minimizes redundancies, maintains business continuity, and maximizes synergies.
Most M&A deals do not fail during the transaction; they fail during the integration phase. Transaction support does not stop after the contract is signed. It continues to help focus on integration planning by:
Establishing defined roadmaps for the alignment of people, processes, and systems.
Establishing performance metrics and deadlines for integration.
Defining opportunities for quick wins and the realization of synergies.
Establishing frameworks for change management.
Through private equity outsourcing support, firms gain access to specialized expertise in integration planning, performance monitoring, and operational improvements, which ensures the newly acquired entity will seamlessly fit into the investment thesis and the long-term growth objectives.
M&A deals are both important and risky. Excitement can speed up decision-making, but the complexity and risks involved require a measured, evidence-based approach. That’s where transaction support plays its most valuable role, not just as a due diligence function, but as a strategic partner throughout the deal lifecycle.
Any business that utilizes professional transaction support will be able to:
Make informed investment decisions.
Negotiate favorable terms.
Avoid costly legal or operational setbacks.
In short, transaction support is not a cost; it is an investment towards achieving success in the deal.
In the world of mergers and acquisitions, the difference between a successful deal and a failed one is usually the quality of transaction support. This assists in identifying risks, easing integrations, and bringing different perspectives that help businesses use their true potential.
As a buyer or a seller, working with experienced transaction support advisors can significantly aid in avoiding some of the common pitfalls. They make sure that your M&A strategy meets its intended goals and objectives.
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