Since you will need to engage in mergers and acquisitions consulting it is important to find reliable professionals like ValleyBiggs. However, the cost of their services costs a good amount of money.
Some business owners think that financing costs in M&A deals are already high and there is no need to hire intermediaries. It is cheaper to give the task to their employees to carry out all the necessary transactions. However, this is a wrong approach. Having intermediaries will help you significantly reduce your costs and time for closing deals. Are M&A deals really expensive? Let’s look into it together.
Types of costs in an M&A deal
When a company is budgeting for M&A transactions, it needs to take into account not only the cost of intermediaries’ services but also additional costs. The latter can include:
- Transaction Costs
These are the direct costs associated with the process of executing the M&A deal - Due Diligence Costs
These costs are incurred during the investigation phase before finalizing the deal - Integration Costs
These are expenses related to integrating the acquired company into the acquiring company - Regulatory and Compliance Costs
These costs arise from the need to comply with legal and regulatory requirements - Opportunity Costs
These are indirect costs related to the potential benefits that are foregone as a result of pursuing the M&A deal - Post-Transaction Costs
These costs are incurred after the completion of the deal
Each of these items is important in its way and companies should realize that it is important to study all of these issues thoroughly before starting each deal. Otherwise, there is a risk that you will not be able to fit into the right budget and the original idea of the deal will not be realized due to improperly planned M&A deal costs for buyers.
Fees and other expenses
When studying the formation of M&A deal costs for buyers, first of all, you should analyze the points about intermediaries’ fees and additional expenses. The lower limit of fees is usually about a couple thousand dollars. You will also need to pay 5% of the deal cost separately.
To save costs, it will be possible to research the market in advance and understand what kind of intermediary you need. In some cases, hiring one can result in much higher costs than working without one. Especially if the intermediary himself does not cope with his duties. So research the potential partner well before you start working and you can reduce your M&A deal costs for sellers or buyers.
Legal costs and deal-breaking fees
Having top-notch lawyers will allow you to get more favorable terms. They can also help you win a court case if the takeover takes place at a time when the other party does not agree with such actions. Of course, your company may have its department, but you can hire intermediaries who for a small fee can provide legal advice. In this case, you need to compare M&A deal costs vs. benefits and if you do not have your lawyer, it is better to entrust it to an intermediary.
Breakage fees can cost you anywhere from 5 to 10% of the purchase amount. This is an extremely unnecessary expense and it is recommended that you do everything possible to avoid it. It is especially frustrating to lose this money if the selling firm has requested collateral or other assets as payment. If such a situation happens, however, having a good lawyer is not going to hurt you. Then you can compensate for failures due to company due diligence. In this case, the amount of your payments will be much lower than the deal-breaker compensation.
Consulting fees for integration and IT fees
Post-merger integration costs are one of the most costly parts, some people think that they can be avoided altogether, but it is more appropriate to devote time and finances to it. It is best to find specialists who will guide you through the integration process for 1-2 years from the time of the deal. Any attempt to save money can lead to difficulties in the further functioning of the overall company after the takeover or merger.
IT technology implementations are also a big expense. But they are necessary if you want the companies to work in one system and employees to have the right access. That’s why it’s best to prepare in advance when conducting transactions and avoid disruptions and malfunctions in the operation of the new company.
Conclusion
At first glance, takeovers and mergers are expensive and you should look for ways how to reduce M&A costs. But it is also important to consider your time costs and the speed of processing the deal. To do all the work promptly for a small fee, you need to hire reliable M&A intermediaries. ValleyBiggs specialists are ready to help you with this issue. You only need to contact us in any convenient way.