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April 13, 2023 5 minute read

Best Practices & Template for creating a M&A Deal Pipeline Executive Summary

The M&A deal pipeline is an essential part of the M&A process. In 2023, the M&A market is projected to reach a global M&A value of $5.5 trillion . To make the best decisions for your business, it’s crucial to consider industry-specific M&A statistics when creating your deal pipeline.

To create an effective M&A opportunity funnel, businesses must follow a step-by-step process that includes defining their target market, identifying key players, developing a value proposition, providing financial projections, outlining potential risks and challenges, and providing a timeline for the M&A process. In 2023, the top sectors for M&A activity are projected to be technology, healthcare, and energy.

When identifying potential targets, businesses should consider the size of the deal, with the average M&A deal size expected to be around $237 million . They should also consider the geography of the target, with North America expected to be the most active region for M&A activity.

It’s important to note that the M&A process is complex, with potential challenges such as regulatory hurdles, integration issues, and cultural differences. Therefore, businesses should work closely with advisors and experts to ensure a smooth and successful M&A process.

Now, let’s dive into some tips and best practices to keep in mind when creating your M&A opportunity funnel. We’ve also included a PowerPoint template to help you frame out an executive summary on your deal pipeline. 

Clearly Define Your Target Market

The first step in creating your M&A deal pipeline is to clearly define your target market. This means identifying the industry or industries that you are interested in and narrowing down your search to specific companies within those industries. To do this, you will need to conduct thorough research on the industry and the companies within it.

Once you have identified your target market, it is important to understand their needs, pain points, and challenges. This will help you tailor your value proposition to their specific needs and increase the likelihood of a successful merger or acquisition.

Finally, it is important to consider the size of your target market. While it may be tempting to focus solely on the largest companies within your industry, smaller companies can also offer valuable opportunities for mergers and acquisitions.

Report on opportunities in your deal pipeline

Once you’ve identified potential targets, the next step is to report on the opportunities in the This means tracking and analyzing the companies that are currently in the M&A process and evaluating their potential value.

There are many factors that can influence the success of M&A transaction, including financial performance, regulatory approval, and cultural fit. By tracking and analyzing the companies in the M&A deal pipeline, you can gain valuable insights into the factors that are driving success and identify potential risks.

Reporting on opportunities in the pipeline can also help you prioritize your resources and make more informed decisions. For example, if you see that a competitor is actively pursuing a target that you’re interested in, you may need to act quickly to avoid missing out on the opportunity. We’ve provided a sample deal pipeline report in the companion PowerPoint template.

Develop a Strong Value Proposition

Developing a strong value proposition is key to a successful merger or acquisition. This means clearly articulating the benefits that the merger or acquisition will bring to both companies, and how it will create value for shareholders.

When developing your value proposition, it is important to consider the needs of your target market. What pain points can your company address that others cannot? How can your company provide unique value to?

Another important factor to consider is cultural fit. Will the two companies be able to work together effectively? Will there be any clashes in values or management styles? 

Outline Potential Deal Pipeline Risks and Challenges

Mergers and acquisitions are complex transactions that come with inherent risks and challenges. In fact, according to a study by McKinsey & Company, about 70% of mergers and acquisitions fail to achieve their intended goals . It is crucial for companies to identify potential risks and challenges upfront and develop a plan to mitigate them to increase the chances of success.

Some of the most common risks and challenges associated with mergers and acquisitions include regulatory issues, financial risks, and cultural clashes. For instance, a survey conducted by Deloitte found that regulatory challenges, including antitrust issues and other legal obstacles, were the top concern for companies pursuing M&A transactions in 2022.

Financial risks, such as overpaying for a target company or underestimating integration costs, can also pose significant challenges and decrease deal value. According to data from Bloomberg, companies that paid a premium of more than 50% for a target company saw their stock prices decline by an average of 9.6% in the year following the deal.

Cultural clashes are another potential challenge that can arise during M&A transactions. According to a report by Deloitte, 83% of respondents reported that cultural integration was a key challenge during the M&A process.

To address the potential risks and challenges, it is recommended that companies undertake a rigorous due diligence process to proactively identify any issues and formulate a comprehensive integration plan. In addition, it is advisable to have the integration team in place well ahead of the actual merger or acquisition date. By taking these steps, companies can enhance the probability of a successful transaction and accomplish their desired objectives.

In addition, it is important to consider the potential impact on employees, customers, and other stakeholders. How will the merger or acquisition impact on them, and what steps can be taken to minimize any negative impact? 

Include Financial Projections

Financial projections are a critical component of any M&A deal pipeline funnel. They help to demonstrate the potential value of the merger or acquisition and provide a roadmap for achieving that value.

When creating your financial projections, it is important to be realistic and conservative. Use historical data and industry benchmarks to inform your projections and consider the potential impact of external factors such as economic conditions and regulatory compliances.

Finally, it is important to consider the potential costs of the merger or acquisition, including transaction costs and integration costs. These should be factored into your financial projections to ensure that the outcome is profitable. 

Provide Detailed Information on the Due Diligence Process

The due diligence process is a critical component of any M&A opportunity funnel. It involves conducting thorough research and analysis to identify potential risks and opportunities and ensure that the merger or acquisition is a sound investment.

When creating your M&A opportunity funnel, it is important to provide detailed information on your due diligence process. This includes the types of information that will be reviewed, the methods of analysis that will be used, and the timeline for completing due diligence.

It is also important to consider the potential impact of due diligence on the timeline and cost of the merger or acquisition. By providing detailed information on the due diligence process upfront, you can help ensure that the process runs smoothly and does not cause any unexpected delays or costs. 

Take aways

Creating a successful M&A opportunity funnel requires careful planning and consideration. By following the tips, best practices, and template shared in this post, you can ensure that your M&A deal pipeline executive summary is comprehensive, well-informed, and well-executed.

Remember to clearly define your target market, develop a strong value proposition, outline potential risks and challenges, include financial projections, provide detailed information on the due diligence process, and emphasize the benefits of the merger or acquisition. With these elements in place, you can increase the likelihood of a successful merger or acquisition and create long-term value for your business.

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