M&A: The five most important prerequisites for a successful transaction

Especially in economically challenging times, M&A transactions offer a powerful opportunity for companies to drive strategic development. Whether a deal ultimately succeeds depends on a wide range of factors – and one of the most decisive is thorough preparation. In this best practices series, our M&A specialists Dr. Tim Bauer and Janina Buchholz explore the key prerequisites for a successful transaction.

The foundation for a smooth process and the subsequent success of the project is laid right at the start. “Just do it” is therefore not a recommended strategy. The fact that it is nevertheless frequently observed is likely one of the reasons why a large proportion of planned transactions regularly fail. A structured approach is therefore required, which can be implemented as part of a well-prepared and planned M&A process (sell-side or buy-side).

Successfully navigating the challenges of acquisitions or divestments requires not only a deep understanding of the economic and legal framework conditions of such deals, but above all a clear vision and an effective planning and implementation strategy.

First things first: Start by defining your goals
The most important questions should be clarified during the initiation phase. A distinction must be made depending on the position (buyer or seller):

BUY-SIDE (buyer perspective)

• What is the overarching objective of the planned acquisition (e.g., market entry, portfolio expansion, technology transfer)?

• How should the target company complement our strategic orientation in terms of growth, market position, and profitability?

• Where is there concrete synergy potential (e.g., purchasing, sales, product development)?
• To what extent should the target company fit our corporate culture and structure?

• Are only economically sound targets considered, or do we also include restructuring or turnaround cases?
• In which industries, markets, or regions are we looking for potential targets?

• Which factors do we consider to have a significant influence on the value of the company?
• What does our integration plan look like in principle?

• What is a realistic timeframe, or when should the purchase be completed?

• What is our objective in selling the company or part of the company (e.g., strategic realignment, succession, capital procurement)? Will we still be available after the (partial) sale?
• Which transaction structure is advantageous for us (e.g., share deal, asset deal, majority/minority sale)?

• How can we specifically increase the value of the company and our competitive position in advance?
• Are there any operational or structural measures that should be implemented before the process begins?

• Which buyer groups are eligible (e.g., strategists, financial investors, family offices)?

• What is the potential business case for different buyer groups?
• Which strategic arguments and key figures are particularly attractive to investors?

• When do we want to enter the market? (Vacation periods; public holidays; seasonality)
• When should the transaction ideally be completed?

Clarifying these questions forms the basis for all phases of the planned transaction and the transaction structure. Other key aspects include defining a target profile for potential targets or investors in terms of size (revenue, number of employees, etc.) and competencies (products, expertise, focus, management, etc.), as well as the basis for a subsequent valuation, taking current trends into account.

A differentiated consideration of potential synergy effects (such as new production sites, better capacity utilization, or a broader product range) is just as essential as the evaluation of management quality, market positioning, and future growth prospects. Only by taking these external factors into account can the impact on the company's value be plausibly quantified—a prerequisite for a well-founded and realistic valuation at a later stage.

Once the strategy has been determined, criteria should be defined that must be met without exception, as well as those that can be handled flexibly (e.g., sales figures). This distinction can serve as a guiding principle for important decisions as the project progresses and has proven itself in practice.

Staying in the driver's seat: the structured process

The aim of a structured approach is to organize the transaction in such a way as to create an optimal competitive situation for the buyer or seller. In the case of divestments, for example, the aim is to achieve the most attractive price possible, increase the likelihood of the transaction going through, and minimize potential sales risks. In a buy-side mandate, the aim is to identify suitable targets so that the best possible fit with the client's own strategy can be found with a high probability of transaction.

Through a structured process with clear guidelines, the buyer or seller ensures that they can proactively shape the process according to their needs from a position of leadership. In the best case scenario, this process forms a binding and reliable roadmap for all parties involved.

The more careful, the better: due diligence
As a fundamental part of the transaction, due diligence requires an in-depth analysis of financial, legal, and operational aspects. Not only financial performance indicators play a role here, but also issues such as contract structures, employee dynamics, and intellectual property. Potential legal risks should also be examined closely.

Once again, the underlying strategy and objectives form the reference point. For example, a growth strategy requires different key figures for a potential target than if the primary focus is on acquiring technical know-how or sales capacities.

Inadequate or incomplete analysis can lead to significant risks, unwanted disputes, and even reputational damage later on in the process. Companies should therefore ensure that the utmost care and expertise are applied at this stage.

Due diligence forms the basis for the drafting of the purchase agreement so that risks can be taken into account accordingly. Based on the findings, it is also important to choose an optimal transaction structure that sets the course for a successful integration, particularly in the post-merger integration phase, and takes the buyer's requirements into account (this also increases the purchase price for the seller).

Company valuation: a wide range of methods

The actual valuation of the company is carried out in the next step using various methods such as discounted cash flow (DCF), comparative analyses, and transaction multiples. Anyone buying a company out of crisis is more likely to take an asset-oriented approach. In a healthy business, on the other hand, corresponding multiples are applied.

The design of financing mechanisms such as earn-out agreements or structured payment plans allows for flexible adaptation to the financial capacities of the parties. This ensures that the transaction is handled securely and efficiently. Contractually fixed terms and conditions that reflect the unique context of the transaction create additional clarity and precision with regard to the rights, obligations, and liability risks of the contracting parties. Potential conflicts are minimized, while the formal and transparent process creates a stable environment for post-merger integration.


Expertise, communication, mediation:
Sound advice for guaranteed success
Buying or selling a company is a highly complex and very challenging process. Against this backdrop, more and more company founders and owners are opting for the support of a qualified external partner. Among other things, this partner should have extensive experience in the field of M&A, but also a large and resilient network in various industries. If the consultant is brought in well in advance of the planned sale, they can also make an important contribution not only to making the company “ready for market,” but also to significantly increasing the sale proceeds.

A smooth transition requires clear communication and good cooperation at the management and stakeholder level. Here, too, the support of an M&A advisor who accompanies the entire transaction process as a key player and mediator can be useful.

If the above requirements are met and consistently implemented, the way is clear for the next step: the negotiation phase.