M&A process: A comprehensive guide

Key takeaways

• M&A creates value—but a significant share of deals fail to deliver expected outcomes.
• The success of a transaction depends on execution across multiple stages, not just the deal itself.
• Early decisions in strategy and target selection influence the entire process that follows.
• Buy-side and sell-side processes run in parallel, but each approaches the deal with different objectives and constraints.
• Valuation gaps, weak integration, regulatory pressure, and other challenges can impact results.

Mergers and acquisitions are a widely adopted strategy for companies looking to increase value, achieve growth, or expand market share. According to McKinsey & Company, global M&A activity reached approximately 4.2% of total market value in 2025, up from 3.3% in 2024 and 3.5% in 2023. While still below the ten-year average of 5.3%, this upward trend signals renewed momentum and suggests further growth potential if historical patterns hold.

Despite this recovery, executing an M&A transaction remains complex and resource-intensive for both buy- and sell-side participants. Failure rates remain persistently high. A large-scale analysis of 40,000 deals over 40 years, cited by Fortune, found that around 70–75% of acquisitions fail to deliver on their intended value. 

That’s the paradox of M&A: high potential, but even higher risk. Executing an M&A process is no small feat and demands significant effort from both the sell- and buy-side. It requires a well-thought-out plan that considers several factors.

The guide below covers the fundamentals of establishing a well-planned M&A process for both the acquirer and the target. Read on to learn more about:

• The process of mergers and acquisitions explained
• How much time does the M&A process take?
• Sides and participants of the M&A process
• M&A process steps from the buy- and sell-side’s perspective
• Common challenges in the M&A process

The process of mergers and acquisitions explained

The mergers and acquisitions process involves multiple parties and stages that differ slightly between the sell- and buy-side. Nonetheless, the mergers and acquisitions process typically includes planning, research, business valuation, due diligence, deal closing, and post-merger activities for both parties.

While these stages outline what happens in a deal, the deal structure determines how the transaction is executed. It defines how ownership transfers, what liabilities the buyer assumes, and how the transaction is taxed. The three primary structures are as follows:

Structure	How it works	Best for	Tax implications
1. Asset purchase	Buyer acquires selected assets and liabilities	Limiting risk exposure; cherry-picking assets	Potential step-up in asset basis; often more favorable for buyers
2. Stock purchase	Buyer acquires shares and assumes full ownership	Simpler transactions; continuity of operations	No asset basis step-up in most cases; liabilities transfer with the entity
3. Merger	Two entities combine into a single legal structure	Strategic consolidation and long-term integration	Can be structured as tax-deferred, depending on jurisdiction and deal design

For a deeper breakdown of these structures, see our dedicated guide on M&A deal structures.

How much time does the M&A process take?

On average, the process can take anywhere from a few months to a few years. The M&A process timeline can vary widely and depends on several factors, such as the size of the companies involved, the complexity of the deal, and the regulatory approvals required.

While the acquisition timeline varies, most deals follow a structured sequence of phases, each with its own duration and dependencies. The table below outlines typical timeframes across key phases of the M&A process:

Phase	Typical duration	Key dependencies
Acquisition strategy	One month	Strategic alignment, internal approvals, and market conditions
Target screening	One to three months	Availability of targets, data access, and advisor support
Due diligence	One to three months	Data quality, responsiveness of the target, and complexity of operations
Integration planning	One month	Clarity of deal thesis, access to management, alignment on synergies
Closure	One month	Regulatory approval, financing, and legal negotiations
Integration execution	6 months to 2+ years	Organizational alignment, execution capability, and change management

To effectively manage the timeline, it’s essential to establish a desired closing date and create a detailed timeline for each step of the process. However, it’s also essential to prepare for unexpected delays or complications, such as regulatory hurdles or legal issues.

Having a contingency plan in place can help mitigate delays and ensure a smoother M&A process. Effective communication across all parties involved in the deal is critical, with open lines of communication maintained throughout the entire process.

Sides and participants of the M&A process

The deal team that drives the acquisition process typically includes many people. The most common roles and responsibilities are described below:

M&A process steps from the buy- and sell-side’s perspective

Merger and acquisition steps and planning are an important part of a corporate development strategy. It’s fair to say that the M&A process stages may differ depending on the deal—some adopt a 7-step acquisition process, while others add a few extra steps to complete the transaction. 

We offer a 10-step process of mergers and acquisitions, both for the sell- and buy-side. The table below outlines how these stages align across both sides before we examine each in detail.

Step	M&A process buy-side	M&A process sell-side
1	Development of an acquisition strategy	Defining the motive for sale
2	Development of search criteria	AvailabilitDocumentation preparation
3	Creating a target list	Identifying and contacting potential buyers
4	Initial outreach and LOI	Receiving bids and meeting buyers
5	Conducting valuation	Receiving LOIs
6	Negotiation	Negotiation
7	Due diligence	Supporting due diligence
8	Purchase agreement	Final negotiation of terms
9	Financing strategy	Board approval
10	Deal closure and integration	Closing and post-deal obligations

10 buy-side stages of mergers and acquisitions

The buy-side M&A process can be divided into 3 phases that look as follows: 

Preparation and planning:

• Development of the acquisition strategy
• Development of the search criteria
• Creating a list of potential target companies
• Starting acquisition planning

Evaluation and negotiation:

• Conducting evaluation
• Negotiating
• Initiating the due diligence process

Deal closure and integration:

• Creating a purchase and sale agreement
• Creating the final financing strategy
• Deal closure and integration

Let’s now review what happens at each stage.

1. Development of the acquisition strategy

Before an acquisition takes place, managers of acquiring companies must understand the reasons behind the acquisition. This may include gaining access to new markets, increasing development opportunities, or diversifying their product line.

The executive team and external consultants collaborate to develop a comprehensive mergers-and-acquisitions strategy. This involves establishing objectives for the prospective deal and identifying potential target companies to help achieve them.

It is critical at this stage to consider the acquiring company’s current financial position, market conditions, and future projections. These factors will impact the acquisition’s viability and the potential benefits that can be realized.

◼️ McKinsey’s research on programmatic M&A shows that companies taking a systematic, repeat-deal approach tend to generate higher returns and outperform peers that pursue deals sporadically or focus solely on organic growth. This reinforces the importance of building a repeatable acquisition strategy rather than treating deals as one-off events.

Strategic and financial buyers approach acquisition strategy differently. Strategic buyers focus on synergies and long-term competitive advantage, often targeting companies within the same or adjacent industries. Financial buyers, such as private equity firms, prioritize value creation and exit potential, focusing on returns over a defined investment horizon.

2. Development of the search criteria

At this step, a buyer defines the set of M&A search criteria to rely on when identifying potential acquisition targets. The list of criteria usually includes:

• Industry

This implies determining whether the potential target operates in the same or an adjacent industry and identifying the crossover between the target’s and the buyer’s industries. (A buyer from the biotech industry will more likely be interested in mergers and acquisitions in the healthcare industry, for instance.)

• Geography

It presupposes investigating whether a potential acquisition can help access new geography or increase market share in existing regions.

• Revenue

This involves identifying the potential size of the united company in financial terms.

• Market

It’s important to analyze the market the target company operates in and whether it can help the acquirer to grow or expand its operations.

• Intellectual property

It implies identifying whether the target company owns any valuable intangible or tangible assets that the buyer can own after the acquisition.

In practice, buyers translate these criteria into a structured screening process, using databases, industry networks, and proprietary deal-sourcing tools to efficiently identify qualified targets.

3. Creating a list of potential target companies

Based on the results from the previous steps, the acquirer can identify ideal targets and compile a list of potential candidates. At this stage, a brief evaluation based on the search criteria and the acquirer’s mergers-and-acquisitions strategies is sufficient, as a thorough evaluation will follow.

This preliminary evaluation should include an analysis of the target’s financial position, industry position, and potential for synergies with the acquiring company.

Buyers typically rank and prioritize targets based on strategic fit and accessibility before initiating outreach, focusing first on the highest-probability opportunities.

4. Starting acquisition planning

This is when an acquirer starts contacting target companies, usually one or two, that seem the best fit for the potential deal. 

Typically, the buy-side sends a letter of intent (LOI) to the potential target company, expressing their interest in a merger or acquisition and providing a summary of the proposed deal.

The key purpose of this step is to inform the potential target of M&A interest, determine whether they’re interested in the deal, and request additional information to be used during the valuation process if the deal proceeds.

At this stage, buyers also align internally on outreach strategy, communication structure, and negotiation boundaries to ensure consistency during early discussions.

5. Conducting evaluation 

After the seller confirms their interest in the deal, the buy-side representatives perform a valuation analysis of the potential target.

The acquirer evaluates a target’s financials to determine its true value as a standalone company and its potential as a merger or acquisition target. At this stage, it’s also important to consider factors such as cultural fit and external conditions that may influence the deal’s cost and success.

For the evaluation process, experts usually use these valuation models:

• Comparable company analysis

This method values the target by comparing it to a recently sold similar company.

• Return-based valuation approach

This method assesses the target based on the investor’s ability to recover after the initial investment. In other words, it helps to understand the potential returns on investment for a particular deal.

• Earnings multiple valuation

This method estimates the target’s value by multiplying the company’s earnings by a multiple. For instance, a company with annual earnings of $1 million with a multiplier of x6 will be valued at $6 million. The multiplier depends on many factors, such as predictability and recurring revenue.

• Discounted Cash Flow (DCF)

This is a widely used valuation method, typically used alongside market multiples to evaluate the target based on its projected cash flows, but adjusted to its current value.

6. Negotiating

Based on the evaluation results, the acquirer initiates negotiations with the target company. 

At this stage, an acquirer presents the target company with an offer based on the evaluation. Both sides negotiate the terms and conditions of the deal.

As a standard approach, acquirers triangulate multiple valuation methods to build a defensible price range and guide their initial offer and walk-away price.

7. Initiating the due diligence process

Due diligence is an important part of mergers and acquisitions. 

Due diligence aims to verify or challenge the previous target’s assessed value. During the due diligence process, an acquirer reviews all the aspects of the target’s operations—financials, human resources, customers, assets and liabilities, tax and legal structure, etc. 

For an acquirer, this stage is about identifying how buying this particular company can help accomplish set objectives. 

Due diligence typically includes several streams of analysis, such as financial, legal, operational, commercial, and IT due diligence, each examining a different layer of risk and value creation. For a deeper breakdown, see our dedicated article on due diligence in M&A.

Buyers use dedicated data rooms and cross-functional teams to surface risks early and refine valuation assumptions before finalizing the deal.

8. Creating a purchase and sale agreement 

After completing due diligence and finding no major issues, the parties to the deal draft the final definitive agreement. It includes details on the type of purchase agreement they’re entering (stock or asset purchase).

The agreement also codifies key legal protections, including indemnities, closing conditions, and post-closing obligations that define how risk transfers between parties.

9. Creating the final financing strategy

As part of the final agreement, an acquirer also develops the final financing strategy, which provides details on the financing options for the deal.

Financing decisions typically balance debt, equity, and internal cash resources, while also considering the cost of capital and lender requirements.

10. Deal closure and integration

After the official deal closure, the parties can begin integrating the two firms into a single entity. This takes a lot of time and planning in many areas—finances, culture, roles and responsibilities, corporate structure, etc. 

The Integration of the acquiring and target companies is an ongoing process that requires thorough attention and evaluation over many months and even years. Often, a merger-and-acquisition playbook is created to ensure a successful integration.

Successful integration focuses on capturing synergies, aligning operating models, and retaining key talent to ensure the deal delivers its intended value.

10 sell-side stages of mergers and acquisitions

The phases of the sell-side M&A process are the same, though the steps in each phase differ slightly from those on the buy side.

Preparation and planning:

• Defining the motive for sale
• Documentation preparation

Evaluation and negotiation:

• Initiating outreach to potential buyers
• Receiving bids and meeting interested prospective buyers
• Receiving the LOI
• Negotiation
• Undergoing due diligence

Deal closure and integration:

• Final negotiation of the terms and closing period
• Getting the final board approval
• Closing and complying with the terms

Now, let’s review what happens at each stage.

1. Defining the motive for sale

A clear understanding of what a potential deal can bring to the company is as crucial for the seller as it is for the buyer.

The sell-side should shape the selling strategy and objectives they want to achieve with a potential acquisition, and define ideal potential buyers. 

It’s also important to be realistic and allow the company’s financial and market decisions to help drive the strategy.

2. Documentation preparation

Once the decision to sell the company is confirmed, the sell-side should prepare an exhaustive kit to present the target company to potential buyers. 

If the seller works with investment bankers, they will prepare a confidential information memorandum (CIM). A CIM is a document that contains all information about a company’s financials, market position, products, and services. From the CIM, the seller can extract information to create short documentation, such as an executive marketing plan, teaser, or marketing materials to share with a potential buyer. 

3. Making contact with potential buyers

The seller can wait for the buyer to contact them or initiate contact.

For this, the seller usually prepares a list of ideal buyers and contacts who best fit the criteria. When being contacted, it’s also recommended to be strategic about selecting potential acquirers. Evaluating all inbound interest may be inefficient, that’s why it’s better to consider only the best fits. 

4. Receiving bids and meeting interested prospective buyers

After initial contact and potential buyers have reviewed the seller’s materials, the target company begins receiving bids. At this stage, it’s important not to settle for the first offer, and sellers need to be conscious about what they share with potential buyers. 

The seller conducts management meetings with the most interested and best-qualified bidders to discuss their offers and strategic intentions.

5. Receiving the LOI 

At this stage, the target company receives letters of intent (LOIs)  from those still interested in the acquisition after initial management meetings.  

Usually, a seller receives multiple LOIs and can choose from them.

6. Negotiation 

At this stage, the seller starts negotiations with all interested buyers to select the most attractive offer.

For a target company, it’s essential to consider M&A strategies at the earliest stage to ensure the potential deal aligns with the seller’s objectives. 

At this stage, the seller typically requires the buyer to sign a non-disclosure agreement (NDA) before sharing confidential information. This is important because during the next stage (due diligence), the seller shares confidential information with the buyer, and keeping confidentiality is essential.

7. Undergoing due diligence

During this stage, an interested buyer conducts due diligence and reviews all the seller’s documentation. The main seller’s objective at this stage is to provide the required documentation and make sure the company is ready for the deal. 

However, modern deal makers often admit that it’s beneficial for the seller to perform their due diligence before the buyer. This way, the sell-side ensures they have all the necessary documentation in place to reduce the risk of complications later. 

For smooth, straightforward due diligence, dealmakers typically use an M&A virtual data room. A virtual data room provides tools to securely manage documents and facilitate collaboration among transaction parties.

8. Final negotiation of the terms and closing period 

After completing due diligence and finding no issues, the parties proceed to the final negotiation stage. 

It usually presupposes negotiating the deal terms based on the results of due diligence. The sides also define the desired closing period for the deal and outline the strategy to achieve that target.

9. Getting the final board approval

Once the buyer has completed due diligence and proceeded with the deal, it’s time for the seller to obtain final board approval. Only then can the buy- and sell-side move forward to the deal closure.

10. Closing and complying with the terms

At the closing stage, the sell- and buy-sides sign the definitive agreement, and the deal is considered closed. 

The next step is integration. This is when a seller must ensure compliance with the terms outlined in the agreement and perform all the actions discussed. 

Common challenges in the M&A process

Even the most well-planned mergers and acquisitions processes can fail for many reasons. The common challenges that deal makers should pay close attention to during the M&A process include:

• Culture clashes

The consolidation of two companies is often challenging, as it requires uniting two distinct corporate cultures. For both sides of an M&A deal, it’s essential to discuss the strategy that will help to avoid cultural clashes during the post-integration phase.

• Inadequate due diligence

Without proper due diligence, it’s impossible to fairly evaluate the target company, and the deal’s success can be at risk. Both the sell- and buy-side address this challenge seriously and ensure a smooth, straightforward due diligence process.

• Poor communication

A lack of communication between the buyer and the seller can lead to a misunderstanding of the deal’s objectives.

• Employee retention challenges

Often, the consolidation of two companies is accompanied by large employee cuts. Both sides must plan the process carefully while focusing on retaining key employees to maintain critical capabilities and continuity.

• Failed post-integration phase

The deal’s closure marks the start of the long integration process, and neglecting that phase would be a mistake for both sides. The post-merger integration framework requires ongoing monitoring for a few months and even years.

• Lack of a motive for the acquisition

The first step of the merger and acquisition process is about understanding the company’s motive for the potential deal. If it’s not clear or is defined incorrectly, the deal risks failure.

• Overvaluation risk

Overestimating synergies or growth potential can lead to overpaying for a target. This creates pressure to deliver returns that may not materialize, increasing the likelihood of value destruction.

• Regulatory and antitrust delays

Authorities have intensified enforcement and oversight of compliance, driven by evolving regulatory frameworks, national security priorities, and rapid technological change. This increases scrutiny, requiring additional diligence, approvals, and documentation, which can delay or complicate deal execution.

Get more insights on mergers and acquisitions from M&A experts at mnacommunity.com. 

FAQ about the M&A process

What are the main stages of the M&A process?

The M&A process typically includes strategy development, target screening, valuation, due diligence, negotiation, deal execution, and post-merger integration (PMI). Each stage builds on the previous one and contributes to the final transaction outcome.

How long does the M&A deal process take?

On average, the process can take anywhere from a few months to a few years, depending on deal complexity, company size, and regulatory requirements. Early stages tend to move faster, while due diligence, approvals, and integration often extend timelines.

What is the difference between buy-side and sell-side M&A?

The buy-side focuses on identifying, evaluating, and acquiring a target company. The sell-side focuses on preparing the business for sale and maximizing value. Both sides follow similar stages but have different objectives and priorities.

What is a CIM in M&A?

A Confidential Information Memorandum (CIM) is a document prepared by the sell-side that provides detailed information about the company, including financials, operations, and growth prospects. Buyers use it to assess the target and determine whether to proceed with the deal.

What are the most common reasons M&A deals fail?

M&A deals often fail due to poor due diligence, cultural clashes, overvaluation, weak integration, and lack of a clear strategic rationale. Regulatory challenges and communication gaps can also disrupt deal execution.

What role does due diligence play in the M&A process?

Due diligence allows the buyer to verify financial, legal, and operational information about the target company. It helps identify risks, validate valuation assumptions, and inform decisions on negotiation and deal structure.