Many companies only begin to consider acquisitions when an opportunity is brought to them through their network or contacts. If the opportunity sounds appealing, significant time, resources, and money are often invested in pursuing it—even though the chances of success are not yet foreseeable. If negotiations fail, the acquisition is quickly dropped. Alternatively, when problems or critical issues arise during due diligence, they are sometimes overlooked because so much has already been invested in the opportunity and viable alternatives are lacking.
To avoid such pitfalls, a structured acquisition process can be used.
What is a structured acquisition process?
In a structured acquisition process, the goal is to build and maintain a well-filled pipeline of attractive opportunities and ultimately complete a transaction with at least one of them.
The aim, similar to a structured sales process, is to create competition among the targets and place the client in a strong and comfortable negotiating position. In addition, the number of opportunities creates transaction security, increasing the likelihood of achieving strategic goals.
Steps in a structured acquisition process
A structured acquisition process can be divided into four phases:
1. Screening Phase
a. M&A Strategy: Together, the entrepreneur and the M&A team derive an M&A strategy from the company’s vision and overall strategy and translate it into concrete search criteria (e.g., revenue size, location, service portfolio, end markets).
b. Research: The M&A team creates a longlist of potential targets that match the criteria and coordinates this with the entrepreneur. At this stage, in most cases, there is no knowledge yet of the targets’ willingness to sell.
c. Initial Discussions: The M&A team contacts the shareholders of the targets and conducts initial discussions to gather further information and determine willingness to sell.
d. Decision Basis: The findings of these discussions are continuously communicated to the client, aligned, and supplemented with recommendations for further action.
The screening phase is pursued intensively at the beginning to build the pipeline. After about 2–3 months, one is usually at a point where discussions can begin with several targets in the next phase. A strong M&A team, however, never closes the screening phase entirely but maintains contact with targets and keeps eyes and ears open for new opportunities.
2. Transaction Phase “Light”
With attractive and willing targets, confidentiality agreements are signed, information exchanged, and management meetings scheduled. These meetings are crucial, as the level of harmony at the principal level sets the tone for the rest of the process. It is not uncommon for one party to withdraw after such a meeting. In parallel, the M&A team prepares an initial indicative valuation of the targets as the basis for an indicative offer.
3. Transaction Phase “Due Diligence”
a. Indicative Offer: This phase begins with the submission of an indicative offer, which includes not only an indicative valuation but also framework conditions under which the client would proceed toward a successful transaction (e.g., timeline, due diligence requirements, exclusivity). These terms are negotiated and often result in a term sheet (similar to a preliminary contract), signed by both parties.
b. Due Diligence: A detailed review of the company is carried out, often involving additional advisors (e.g., lawyers), and the findings are incorporated into a draft purchase agreement.
c. Investment Case + Transaction Financing: Unlike most M&A advisors, i-capital—together with its sister company i-unit—offers clients a detailed feasibility analysis as well as support in structuring transaction financing.
4. Execution Phase
In the final phase, the purchase agreement is negotiated, signed, and the transaction successfully completed.
Advantages of working with i-capital
Experience: The international i-capital team has a unique track record in successfully executed acquisition processes, with nearly 100 completed projects across diverse industries.
Depth of Advisory: i-capital’s setup as part of the i-unit group is unique in Germany. In addition to transaction advisory, we can offer:
- Feasibility analyses including integrated financial planning of the target, competitive analyses, etc., in collaboration with our own analysis team
- Transaction financing with our sister company i-unit
- Post-merger integration with our sister company re-unit
- And much more…
If this has sparked your interest, please don’t hesitate to contact us—we look forward to getting to know you.
Tel. +49 (0)531 180 59 300
