M&A is an effective way for businesses to grow. However, the process is rife with potential pitfalls that could cause acquired businesses to lose their value. The following four steps can help you avoid common pitfalls of acquisition and make your next acquisition an effective strategy for growth.

1. Create a plan for acquisition.

One of the primary causes of failed acquisitions is poor planning. By creating an acquisition plan from the beginning you can be sure that your company is making the most of its value and is in line with the objectives of your M&A strategy.

Typically, this means establishing an inventory of M&A target companies and then narrowing the list with the use of search criteria. These may include factors like the industry sector, deal size market share, deal size and operational scale. Corporate development teams can make use of different sources to identify M&A potential targets, such as online sources like DealRoom and LinkedIn trade journals, trade magazines and industry associations, and databases of investment banks and private equity companies.

2. Set up a team that will manage the M&A process.

It’s crucial that management teams establish an executive team headed by a senior executive that is able to supervise the M&A process from beginning to completion. This is essential to ensure that the strategic goal behind the acquisition doesn’t be lost and the integration process is smooth. It is also crucial to have experts in human resources on the M&A teams to estimate benefits and compensation costs and quantify actuarial estimates of financial and pension liabilities.

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