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March 23, 2023 5 minute read

Ensure Effective M&A Deal Pipeline Management

Each M&A deal brings its own unique challenges and opportunities. Over the years, M&A practitioners have broken down the deal-making process into identifiable chunks. Collectively, this process has become known as the M&A pipeline.  

Applying solid M&A deal pipeline management principles can smooth out the bumps on your road to success. The following guide contains a comprehensive overview of the elements that make up a successful M&A deal pipeline.

The M&A Deal Pipeline

The M&A deal pipeline provides a comprehensive start-to-finish overview of the M&A process. Understanding how it functions can save you time and energy when you are making your next M&A deal.

Strategic Planning

The more granular you get in the planning stages, the less trouble you’ll have later on since poorly defined goals are a major contributing factor to the failure of many M&A deals. Before you move forward, you should develop a set of specific acquisition criteria. At this stage, you should define the parameters of your ideal target company. 

For example, if you’re a furniture manufacturer and you’re looking to cut down on your supply costs, you may choose to purchase a forest (this actually happened in 2015 when Ikea purchased almost 83,000 acres in Romania). 

Setting out key metrics — including operating expenses, acceptable locations, how much wood you’ll need to harvest on a yearly basis, and other details — will help you make the right choice as you move forward. 

Identify Potential M&A Deals

Now that you know what type of company you’re searching for, it’s time to put together a long list of potential acquisitions. Filter out companies that appear unsuitable based on publicly available data. To compensate for your high standards, leave no stone unturned. By the end, you should have at least 20 high-quality companies on your list.

Screening and Analysis

At this point, you’ll start to reach out to your targeted companies to gauge interest. If interest exists on the other end, you can move on to light diligence. This doesn’t quite reach the level of full-blown due diligence, but an NDA likely will come into play. You may wish to conduct an onsite visit, and you’ll need to take a look at some confidential information to ascertain if the deal is a good move. 

If you have more than one target business by the end of this process, consider ranking your deal targets. Create a priority list that assesses each company based on critical factors, such as its bottom line and fit with your company. Next, you’ll enter negotiations and create a nonbinding letter of intent (LOI) stating the terms and conditions of the sale. 

The agreement contained within the LOI should, of course, be contingent upon the acquisition company successfully passing through the due diligence stage. If due diligence brings new information to light, the terms may need to be altered or abandoned completely.

M&A Deal Due Diligence

Once you’ve compiled a shortlist of top candidates, you’ll need to do some heavy lifting. Due diligence does more than provide a legal defense against accusations of fraud: This process compares vital reports of information to primary source documents, protecting you from unforeseen financial difficulties.

Due diligence is broadly classified as: 

  • Operational due diligence refers to the company’s operational practices, such as procurement, manufacturing, and shipping. Identifying inefficiencies can prevent you from making a costly mistake.
  • Legal due diligence encompasses a broad area of legal matters, including contracts, regulatory compliance, liabilities, and more.
  • Financial due diligence deals with the company’s past and ongoing financial performance. You’ll need to examine its balance sheet and conduct audits to ensure accurate reporting.
  • Tax due diligence focuses on the business’s tax obligations. Make sure that its tax records are up to date, and take a look at how the merger or acquisition will impact its tax liabilities.

Execution and Integration

You’ve successfully completed due diligence, so now it’s time to execute the deal. After all the paperwork has been signed, the integration process will begin. This typically takes between three to six months, although more complex deals may take additional time. During this process, you’ll eliminate redundancies to maximize synergies. You may merge various operational capacities for greater efficiency.

Your legal departments will be busy ensuring regulatory compliance measures are met and that contracts accurately reflect your company’s new structure. Finance and human resources will need time to combine information and learn new processes. Across the board, you’ll want to take proactive steps to prevent culture clashes from impacting productivity and workplace satisfaction.  

Stage Gates and M&A Deal Pipeline Management

The stage gate approval method has emerged as a handy tool for facilitating effective decision-making. Stage gates are a conceptual framework that helps businesses create clear demarcations during repeatable processes. You’ll divide the M&A pipeline into distinct stages, and to pass from one stage to the next, you’ll have to clear a metaphorical gate.

Meeting each benchmark will allow you to carefully assess your progress and prevent loose ends from accruing. You should use this method in conjunction with the steps outlined above. These dual processes will help you stay on track by conceptualizing the same process through different lenses.

The M&A pipeline can be broken down into three major stage gates.


At this stage, you need to provide a clear and detailed justification for pursuing a deal in the first place. M&A deals are notoriously expensive, and they fail far more often than they succeed. Do not undertake such an endeavor lightly. 

Creating a solid deal strategy highlighting the specific ways that the deal will benefit your business is a must before you move on to the next stage of the process. You also need to take the broader economic picture into account. If you’re looking to expand into a foreign market, for instance, you should conduct a thorough study of the regulatory atmosphere and the ease and cost of doing business there.

Preliminary Analysis

After creating a nice, long list of potential acquisitions, you’ll want to create a shortlist of high-potential sellers. Reach out to your prospects to gauge interest and conduct additional research, including light diligence. The goal here is to winnow your long list into a shortlist containing just a few (or possibly just one) potential sellers. 

You’ll need to select the right valuation model for your target businesses before entering into negotiations. Once you have a number in hand, you’ll go back and forth across the negotiation table until you can reach a mutually agreed-upon number. This stage will end when you issue an LOI.


Due diligence is the last major step that you’ll have to take before you can begin wrapping up the acquisition process. At this stage, you’ll want to get input from key decision-makers, such as your board of directors. They’ll bring a fresh perspective to the table. Use their insight and judgment to double-check your work. You should receive a confirmation on critical deal aspects like the selection of your valuation model and the accuracy of your valuation figure. Trusted individuals should reaffirm the benefits and merits of the deal.

Use Devensoft To Manage Every Stage of the M&A Pipeline

Traditionally, M&A deals were managed using unwieldy spreadsheets and decentralized communication channels. Cross-functional knowledge sharing was a chore, and inefficiencies chipped away at the value of a deal. Today, though, M&A software management systems like Devensoft let you control the entire M&A process from beginning to end.With Devensoft, facilitate cross-team collaboration, gain access to helpful legal workflow templates, and take advantage of advanced analytics. Sign up today for a free demo today.

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