Recent Deloitte survey results indicate that a strong mergers and acquisitions strategy is the top reason for M&A deal success. This proves that an M&A deal is a complex financial transaction that requires meticulous planning. If not planned properly, it can be doomed to failure.
This article focuses on the importance of writing a comprehensive business acquisition plan as a key part of successful acquisition strategy. Read on to explore the main elements of an acquisition business plan and learn how to write one.
What is a business acquisition plan?
A business acquisition plan is a strategic document that outlines the steps, goals, and resources required to acquire a target company.
A business plan for merger and acquisition is an integral part of successful acquisition planning. It serves as a roadmap for the buy-side M&A process, describing all the stages of the acquisition from target identification to post-merger integration and exit strategy.
Having a well-structured plan for acquisition is essential for the acquirer since it helps with the following:
- Clarity on objectives
A business acquisition plan ensures that all stakeholders understand the reasons for the acquisition, and thus support it.
- Risk management
It identifies potential risks that might occur during an acquisition (such as financial, operational, and legal) and develops strategies to mitigate them.
- Resource allocation
Helps plan the necessary financial, human, and technical resources for the acquisition, ensuring there won’t be a shortfall during the M&A process.
- Timeline management
A business acquisition plan establishes a timeline to ensure the acquisition process stays on track.
- Synergy identification
It helps recognize synergies between the two businesses, which is essential when integrate operations effectively.
Key components of an acquisition plan example
Let’s now look at the typical components in a business acquisition plan.
1. Executive summary
This section provides an overview of the acquisition plan, summarizing the key elements of the deal: the target company, rationale, financial outlook, and expected strategic benefits. It’s a concise snapshot to help stakeholders grasp the overall purpose and objectives of the acquisition.
An executive summary is typically crafted after all other components of the acquisition plan are ready.
2. Strategic rationale
The foundation of your acquisition plan. It explains how the acquisition aligns with long-term business goals. Common acquisition strategies include expanding into new markets, acquiring new technology, talent, or intellectual property, improving competitive positioning, or achieving economies of scale.
The strategic rationale must be compelling to justify the resources, time, and risks associated with the deal.
Explore more about merger and acquisition strategies in our dedicated article.
3. Target identification
Here, you outline the criteria for selecting potential targets.
This includes identifying companies that fit the strategic objectives of your business in terms of industry, size, market position, and culture. Its main purpose is to ensure the acquisition targets the right company, market trends are considered, and that there is a good strategic fit.
4. Target evaluation and financial analysis
This section is all about numbers. Here, you provide results of the initial assessment of the target’s financial position, including its income statement, revenue, profitability, financial statements, cash flow, and overall financial health. You also share the results of a valuation analysis to determine a fair price for the acquisition.
5. Due diligence
This section details what types of due diligence are to be performed: financial, operational, legal, and human resources. It also lists the main areas to focus on during the due diligence process and what outcomes are expected.
It’s also reasonable to include an outline of results that wouldn’t be satisfactory when proceeding with the acquisition.
6. Deal structure
Outlines how the acquisition will be financed and the type of deal proposed (stock purchase, asset purchase, or merger). It also includes details on payment terms (cash, stock, or a combination), the use of debt, and any contingent payments or earn-outs.
The deal structure also covers issues like governance post-acquisition and the treatment of existing management.
7. Integration plan
The percentage of deal value spent on integration is increasing over the years, that’s why it’s essential to consider post-merger integration execution at the very beginning of the planning process.
It should be a detailed roadmap of how the acquired business will be integrated into your existing operations post-closing. This covers organizational structure, systems integration, cultural alignment, communication strategies, and key milestones for success.
8. Risk assessment
This section describes potential mergers and acquisitions risks, such as financial, operational, regulatory, or cultural integration risks, and provides strategies to mitigate them. Risk assessment helps an acquirer to prepare for uncertainties and challenges during and after the acquisition.
9. M&A team introduction
Introducing the key members of the acquisition team, you should outline their roles, responsibilities, and expertise in driving the acquisition forward.
The team typically includes financial analysts, legal advisors, integration specialists, and senior executives who oversee the transaction.
10. Exit strategy (if applicable)
Though not always part of acquisition plans, this section is important if there’s an intention to eventually divest the acquired business.
It details potential exit options such as selling the company, merging with another entity, or taking it public, providing flexibility for future decisions.
Questions to ask when developing your business acquisition plan
Below are some examples of questions to ask yourself when writing an acquisition plan to make sure all critical aspects are covered.
| Acquisition plan components | Examples of questions |
|---|---|
| Executive summary |
|
| Strategic rationale |
|
| Target identification |
|
| Target valuation and financial analysis |
|
| Due diligence |
|
| Deal structure |
|
| Integration plan |
|
| Risk assessment |
|
| M&A team introduction |
|
| Exit strategy |
|
Finalizing and reviewing the acquisition plan
The finalization of your business acquisition plan is typically about reviewing the key components and making the adjustments needed.
Here are the main considerations:
- Review the key financial, operational, and strategic elements
Ensure that the due diligence process is fully described, financing is secured, and all integration plans are solid. Key agreements, such as purchase price, payment terms, and post-merger goals, should be clearly defined.
- Deliver effective stakeholder communication
Validate all occurring assumptions with internal teams, investors, and board members to ensure alignment.
- Engage outside advisors and consultants
Third-party specialists’ expertise helps mitigate risks during the procurement process. They help ensure the valuation is accurate, review regulatory compliance, and assist with the post-merger integration strategy outline.
Key takeaways
- A business acquisition plan is a strategy document that describes the main steps, goals, and resources required to acquire a target company.
- Having a well-structured acquisition plan ensures objectives clarity, risk management, resource allocation, timeline management, and synergy identification.
- Key components of an acquisition plan typically include an executive summary, strategic rationale, target identification, financial analysis, due diligence, deal structure, integration plan, risk assessment, M&A team description, and exit strategy.
