What are the steps in an M&A transaction?

Answer 1

M&A is a fascinating thing to do. First, you have to narrow-down on your target companies by analyzing the multiples, synergies, products, markets, valuation, etc.

Go find an investment banker who can help you with the transaction.
Make you due diligence, both on financial and legal perspective.
Make you own independent valuation of the company and make a non-binding offer to the sellers. Use the discounted cash flow to have an accurate valuation model. Then supplement this with multiples and comps analysis.
Negotiate with the sellers until you all agree on a price.
close the transaction and announce it in the equities market.
Do your post-merger synergies.

Answer 2

The idea is to take over competition by buying them out.

Once you've made the aquisition, then the next thing to do is reduce it's overhead costs by eliminating duplicated workers and scaling down office space.

In so doing this, you keep the economy strong by eliminating costs of doing business (inflation), while making those in the top executive spots richer.

These have to be carefully planned out steps that require approval from the government agencies that watch for portetial monopolies, but this part of the M&A activity is realtively easy as compared to what it was like in the early part of the last century.

Usually the red tape from government agencies has a green light for approving of mergers and aquisitions.

Answer 3

First you have to target the business you are looking to acquire. Determine if you are going to purchase the entity by issuing debt, using cash, or issuing more stock. You must determine the fair value of the assets and liabilities of the firm being acquired. Once that is determined you take the value of the net assets of the firm and compare it to the price the firm is paying. If the price paid exceeds the value of the assets goodwill is created. In accounting terms it is called a premium If your price is way below the value of the assets it would be considered an extra ordinary gain. Anything in between would be considered a bargain hence you would have to write down the fair value of the assets to equal the purchase price.