The M&A deal process reads differently from the buy side, because the buyer is running an internal approval process at the same time as an external transaction and the two have different clocks. Seven steps and two approval moments, and the first approval is the expensive one: it authorises spending real money to find out whether the deal is what it looks like. This page walks the seven from the buyer's chair.
Steps one to three: origination, screening and the first approval
The opportunity arrives or is originated, somebody screens it in days, and if it survives it goes to an internal committee that authorises diligence spending. Everything after that authorisation costs advisers' fees whether or not the transaction completes, which is why the screen is worth doing properly.
Steps four and five: indicative offer, then exclusivity
An indicative range on the information available, then, if selected, a period of exclusivity. The range is made on limited information and at the optimistic end, which is why the gap between an indicative offer and a final price is the part of the process most sellers remember.
Step six: diligence, in six parallel workstreams
Financial, legal, commercial, technology, tax and management, with the buyer coordinating. On this site's worked example, chasing 68.4 open requests over six weeks is 164.16 hours and $15,595.20 of the buyer's own analyst time, which is invisible in every adviser quote and entirely real.
Step seven: the price walk and signing
Adjustments arising from diligence, the completion mechanism and the warranty package, then the second approval on the evidence produced. A buyer that walks the price without a specific finding attached to each adjustment is a buyer whose next approach in that sector will be received differently.
Questions people ask about m&a deal process
Which decision costs the most?
The first internal approval, which authorises diligence spending. Everything after it costs advisers' fees whether or not the deal completes.
Why do indicative offers move?
They are made on limited information at the optimistic end, and diligence produces adjustments. Vendor diligence narrows the gap.
What does the buyer spend that nobody quotes?
Its own analyst time chasing the request list: 164.16 hours and $15,595.20 on the worked example here.