Mergers and acquisitions: Five stages of an M&A transaction
Mergers and acquisitions (M&A) are powerful tools for business growth, transformation and strategic realignment. But what is M&A in business, and what does a typical M&A process look like in practice?
Whether you’re preparing to acquire another business or considering selling your own, understanding the five key stages of a mergers and acquisitions transaction can help you plan, negotiate, and execute with confidence.
In this insight, we break down each stage of the M&A lifecycle, from strategy and target identification through to post-deal integration.
M&A can support business objectives such as entering new markets, acquiring talent or technology, achieving economies of scale, or increasing market share. It’s a strategic move that requires careful planning, due diligence and execution.
The five stages of a typical M&A transaction
Understanding the M&A process helps all parties stay aligned and focused on value creation. Here's a breakdown of the five core stages:
1. Strategy and preparation
Every successful M&A transaction starts with a clear strategy. This involves defining the business case for the merger or acquisition, identifying key objectives, and setting financial and operational criteria.
Common goals include:
- Expanding into new markets or sectors
- Strengthening supply chains or operational capabilities
- Accessing new technologies or intellectual property
- Accelerating growth through synergies
At this stage, sellers may also take steps to boost their business valuation before a sale through targeted improvements.
A well-defined M&A strategy ensures that future decisions - such as target selection and deal structuring - remain aligned with long-term goals.
2. Target identification and evaluation
With a strategy in place, the next step is to identify suitable targets (for acquirers) or potential buyers (for sellers).
Key considerations during this phase include:
- Financial performance and sustainability
- Market position and reputation
- Cultural compatibility
- Legal and regulatory status
This stage often involves engaging advisers, such as corporate finance specialists, legal counsel and tax experts, to evaluate risks and identify value drivers. For buyers, this step is about shortlisting targets that fit both strategic and financial criteria.
3. Due diligence
Due diligence is a critical step in any M&A process. It involves a detailed investigation of the target company's financial, legal, commercial and operational status.
The goal is to confirm that the business is what it claims to be - and to uncover any hidden risks that could impact valuation or the deal structure. Common areas of focus include:
- Financial records and tax compliance
- Employment contracts and liabilities
- Intellectual property rights
- Ongoing legal disputes
- Customer and supplier agreements
Thorough due diligence can help buyers avoid costly surprises and strengthen their negotiating position.
4. Deal negotiation and structuring
Once due diligence is complete, both parties work to agree the terms of the transaction.
This includes:
- Purchase price and payment terms
- Deal structure (share purchase, asset purchase, merger)
- Warranties, indemnities and representations
- Regulatory approvals and conditions precedent
An experienced adviser can help structure a deal that manages risk, supports tax efficiency, and aligns with commercial objectives. At this stage, sellers may also consider value-enhancing actions to improve outcomes or mitigate post-deal liabilities.
5. Post-deal integration
Signing the deal is only the beginning. The final and often most complex stage of an M&A transaction is post-deal integration.
This involves combining people, systems, processes and cultures to achieve the expected benefits of the transaction. Common integration priorities include:
- Retaining key talent
- Aligning IT and finance systems
- Communicating with stakeholders
- Realising synergies and efficiencies
Successful integration is key to unlocking long-term value. It requires a clear roadmap, strong leadership and continuous monitoring.
The M&A process is multi-faceted, and every transaction brings its own challenges. However, by understanding the five core stages - strategy, evaluation, due diligence, negotiation, and integration - businesses can approach mergers and acquisitions with clarity and confidence.
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Whether you're exploring growth opportunities or preparing to exit, Azets’ Corporate Finance Advisors can support you at every step of the journey with expert advice tailored to your goals.
