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The Ultimate Guide to M&A Pipeline Management

While there is no set playbook for each and every merger and acquisition, there is a basic series of events that takes place in all deals.

What is an M&A Pipeline?

An M&A pipeline refers to the flow of events that occur during a transaction and how stakeholders work them. The pipeline steps begin with acquisition strategy and deal sourcing, proceed to acquisition planning, negotiating, and due diligence, moving all the way to transaction and integration.

In order for the M&A process to stay organized and intentional, each milestone of the pipeline should have set entry criteria so it is clear when it is time to move to the next step. Finally, and perhaps most importantly, an M&A pipeline should be a collaborative and efficient process, not merely steps to work through, in order to close deals that live up to their potential value on paper. 

M&A Pipeline Stages

  1. Deal sourcing
  2. Connecting with prospects
  3. Analysis of prospect (value and strategic fit)
  4. Due diligence
  5. Transaction
  6. Closing
  7. Integration
M&A pipeline

How to Build an M&A Pipeline

How to Build M&A Pipeline

Acquisition Strategy & Deal Sourcing

The pipeline begins with acquisition strategy and deal sourcing. At the commencement of this step, the acquirer needs to firmly establish the rationale and motivations behind its desire to acquire targets and engage in the M&A process. Without this critical step, the acquirer is less likely to select appropriate and fruitful targets.

Certainly the most common motivation for M&A is financial reward based on maximizing synergies, such as cost and revenue synergies. Other motivations include diversification, tax benefits, empire-building, and international goals.

Once the acquisition mission is set, the Corporate Development team needs to generate a database of targets. The target list must then be refined based on the acquirer’s motivations, resources, and goals; at this stage, criteria such as deal size and strategic fit are examined. More on how to refine your criteria can be found here.

Connecting with the Seller & Initial Data Requests

When a target is a strong strategic fit, Corporate Development must work to connect with the seller (more on how to do this can be found in article How to Have the Best Strategies for Advantageous Deal Sourcing) and establish a connection, while at the same time gathering initial information such as KPIs.

Following this connection and collection, the Corporate Development team must make the critical decision of whether to continue pursuing the target. If it has not gathered enough information to make a sound, informed decision, the team will need to send over an initial data request. If the decision to move forward is made, an in-person meeting should be scheduled, and this meeting should focus on five essential questions specific to the target that will provide Corporate Development with enough information to keep the potential deal moving forward toward due diligence. 

Throughout this time period, Corporate Development must be discussing potential offer and negotiation strategies. Additionally, it needs to be sure it can articulate the value of the potential deal to the other stakeholders at the acquiring company.  Corporate Development should even begin thinking about the integration process.

Due Diligence:

Thanks to the Securities Act of 1933, due diligence is an M&A necessity. While it is meant to provide companies with valuable information, diligence often gets a bad rap as it can be an overwhelming, time-consuming task of data collection, that, if done incorrectly, can lead to loss of profits and bad blood. Here it is important to acknowledge that due diligence is not only about legalities, but also about fleshing out the buyer’s picture of the target’s business model, value drivers, and people.

The type of information uncovered during diligence allows the acquirer to see both the big picture and the details through the collection of information that is not public knowledge. The process is usually carried out by the acquirer and its stakeholders and advisors, such as attorneys, financial advisors, and team leaders, and takes, on average, 30-90 days.

Much of the work is done on-site and via collaborative and secure virtual data rooms (VDRs). Everything including tax documents, sales breakdowns, future budget plans, employee contracts, and more is collected during this time. 

Integration:

Integration is the combining of two companies - their employees, their operations, and their finances. It has the power to make or break deals, and the best acquirers have robust integration practices. These practices include beginning integration planning early on in the M&A process, using diligence team members as integration team members later in the process in order to establish continuity, and developing integration plans before the deal closes. Acquirers who do not give integration enough serious forethought may lose out on capturing synergies or lose key employees.

More on how to fortify your integration practices and integration strategies for modern business environments can be found here 3 Ways to Fortify Your Integration Practices and Integration Strategies suited for Modern Business Environments.

How to Manage Your M&A Pipeline

1. Store Documents Safely

Clearly, in order to manage your pipeline, you first need a secure place to safely store all of your documents. Virtual data rooms are the preferred storage tool as they eliminate the unwieldy and inconvenient exchange of hard copies and provide more safety and security, which increases collaboration and protects the deal; at times, VDRs also offer project management features.

2. Eliminate Work Silos With Strategic Communication

Transparency throughout the M&A process breeds efficiency and brings concerns and potential roadblocks to the forefront. Daily stand-ups for teams (15-30 minute meetings) are ideal. In addition, team leaders should then meet weekly or biweekly to share out information; this pattern of reporting upwards should continue until it reaches the highest level. With this Agile inspired style of managing the pipeline, deals cannot fall into the trap of working in silos, which, in turn, eliminates redundant work, holds team members accountable, and keeps stakeholders in the loop.

M&A Pipeline Management - Kanban View

What To Track On Your M&A Pipeline

1. Tasks

Prioritizing tasks correctly, not just marking everything “high” or “low” priority (because let's face it, the tendency is to mark the majority of items “high priority”), can simplify the diligence process and eliminate wasted time by reducing wait-time and redundant tasks.

The buy side can begin this process in the pipeline by creating a rough, preliminary outline of the deal’s milestones (ideally, this would be done at the kick-off meeting with stakeholders from both sides). More specifically, this initial outline can be made into a list of tasks that are ranked in descending order of importance so all parties are aware of the next step.

In addition, establishing this list in a virtual dashboard allows everyone to easily access it and track deal progress. 

2. Risks and potential issues

Since the goal of M&A is usually to generate revenue, risks related to products, customers, and the target’s go-to market must be tracked. Additionally, the people aspect cannot be overlooked; the best acquirers take into consideration and track company personnel risks/issues, as well as change management and culture risks/issues. 

3. Specific data on potential targets

You will want to track potential targets to provide Corporate Development with valuable data on your M&A practices. For instance, you should track how long it takes targets to move through the pipeline and the value of the targets in the pipeline, also noting if this value changes. 

Common Difficulties:

  1. Loss of momentum/deal fatigue 
  2. Redundant work/lack of efficiency
  3. Worker burnout and reduced company morale
  4. Growing stakeholder dissatisfaction
  5. Failure of deals to reach their financial potential

Using Excel for M&A Pipeline Management

Keeping track of all your targets and deals in one location is essential to easing some of the chaos and stressors that can be associated with dealmaking. Excel is a tool most practitioners are familiar with that can easily be leveraged to help organize deals in your M&A pipeline. More specifically, here are our Excel field recommendations:

1. Be sure to cover the basics such as:

  • Target name
  • Target location
  • Business category
  • Basic company information / brief description of the company
  • Team leader/person in charge of this deal

2. Additionally, you’ll want your Excel sheet to include a short version of your company’s rationale behind the deal - how does this deal tie into your overall strategy? 

3. Since you’re using Excel to keep track of multiple deals, you will want a field for deal status so you can easily track where each deal is in the pipeline. You might also choose to include a brief description of status. 

4. Finally, many practitioners also include a field for financial information (such as tax returns, accounts payable, accounts receivable, balance sheets, income statements, and credit report).

But Is there a better way?

What is M&A Pipeline Management Software?

M&A pipeline management software is essentially M&A project management software that, ideally, is intuitive and collaborative, allowing for stakeholders and team members to communicate and remain accountable throughout the M&A process.

Pipeline management software can revitalize your M&A practices as it fosters organization and efficiency when multiple deals are in progress.

M&A pipeline management

M&A Pipeline Management Software Providers

1. DealRoom - Similarly, DealRoom is an ideal choice for M&A pipeline management because of its centralized location and smarter system, which simplify the entire M&A process from tracking potential targets to due diligence. For instance, users no longer need to rely on emails and spreadsheets, as communication is streamlined in a central hub. Within this hub, there are many features that allow for a more efficient and Agile workflow: tasks are clearly and easily assigned, duplicate requests are eliminated, and items can be tagged for integration and future use - these features allow stakeholders and key players to work methodically and stay organized in a process that is historically chaotic.

2. Devensoft - Devensoft also has a toolkit pack that includes items such as checklists for tracking targets, diligence, and integration, making it another appropriate for pipeline management. 

3. Intralinks - Intralinks is a VDR often used for M&A, and while it boasts top notch security and can increase collaboration and efficiency, it does not provide specific features related to workflow and pipeline management.

4. Midaxo - Midaxo users have access to playbooks and a pipeline reporting pack which, along with their pipeline feature, make it a strong fit for pipeline management. 

M&A pipeline management softwar

M&A Pipeline Template

M&A pipeline templates are a necessary resource for all dealmakers, especially those navigating multiple deals in different stages of the M&A process.

Templates allow stakeholders and team members to track everything from prospects and background information on each prospect, to deals and their leaders in every stage of the M&A process. While these templates are extremely useful, it is important for users to remember to input only essential information - the templates should provide just a brief overview of information related to the deal.

DealRoom is about to introduce a feature in its software that will allow users to input templates from Excel into the DealRoom platform, and DealRoom will auto-populate the pipeline with the provided information.

Download sample M&A pipeline template

Download due diligence & integration deal checklists

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