Talking M&A Series

Welcome to the first article in our series on mergers and acquisitions (M&A). At Basswood Counsel, we aim to explain the M&A process in a straightforward and practical manner for business owners, boards, and executives. Whether you’re considering M&A as a one-time event or as part of your ongoing business strategy, this series will guide you through the essentials.

Background 

Mergers and acquisitions (M&A) can seem mysterious and complex to many business owners and executives. Most will only experience one or two M&A transactions in their careers, such as selling their business or acquiring another. These events can be emotionally and psychologically challenging, beyond the commercial aspects. It is therefore particularly important that a business owner, a board, or an executive team be deliberate in assembling a team of advisers able to efficiently and proactively guide and support them before, during and after a transaction, as an M&A transaction is not an event but rather a process interspersed with a series of events.

Current Environment 

In late 2024, U.S. business owners, executives, and investors were optimistic that the new administration would boost M&A activity. Factors like increased business investment, deregulation, and reshoring of manufacturing were expected to drive this trend. This impetus for business transactions was expected to be complimented by large and still growing capital residing in private equity and credit funds seeking businesses and industries to invest and capture, especially small and medium domestic service and manufacturing enterprise roll ups. However, the actual experience of the first quarter of 2025 has been a stalled M&A market both large and small transactions, with a few exceptions that transcend the overwhelming concerns about tariffs and general economic policy priorities. What has been evident in the early months of the new administration is that businesses do not tolerate uncertainty, whether it is with respect to policy or otherwise, as the lack of clarity impedes their ability to effectively plan and navigate the conditions. 

Even though the M&A market has been moribund, business owners should still prepare for potential transactions. Preparation is crucial for success, just like being ready for investment. Trying to manage an M&A transaction while running your business can be overwhelming. Balancing daily operations, building your team, and negotiating with the other party can lead to a chaotic and costly process. Preparation helps avoid these pitfalls. Experienced counterparties are very adept at identifying when the other side is ill prepared and will seek to leverage an advantage through control of the process, time frames and deal terms, especially seeking to have key terms cemented in their favor at the outset and narrowing scope for negotiation in each successive step of the process.  

Building Your M&A Team 

Your M&A team will include both internal and external members. Depending on your business’s capacity, these roles can be filled internally, externally, or a mix of both. The external team members or advisers are usually a financial advisor or investment banker, accountants, tax adviser and legal counsel. For a business to benefit the most from its external advisers, it is ideal the relationship develop before the particular transaction presents itself because there is an opportunity for the representatives to have developed a relationship and under an understanding of the underlying business that they will be representing. That said, good advisers are very adept at being engaged with a transaction imminent and getting up to speed with the business and its leadership. The financial adviser and the outside legal counsel tend to be lead of the outside advisers and to do so at varying stages of the process. Financial advisors tend to lead at the outset of price and value exchange negotiations and perhaps facilitating initial communications, while outside legal counsel will then lead once a framework, or terms have been established and there is now a race to completion. That leadership isn’t done to the exclusion of the other outside advisers, rather they are consulted and provide material support as needed.  

With an external team of advisers assembled, a business owner, board or executives are able to undertake an invaluable exercise that not only prepares them for an M&A transaction but also will benefit their overall business planning. Top performing public company boards and executive teams regularly study and explore potential strategic opportunities for the company and business, and even actively pursue them. This includes exploring a sale of the business or company, entering into a business combination with another company, acquiring another business or product, raising capital, restructuring the business, or other potential major actions to alter the trajectory of the existing business and operations. In engaging in this process the business seeks to be well positioned to execute an attractive pathway while also retaining the option to change course with reasonable awareness. Undertaking an exploration of strategic alternatives will touch upon aspects of the M&A process and thus will prepare the collective internal and external teams for when a transaction is pursued, thus any gaps, deficiencies or other concerns that exist can be addressed or at the least won’t be a surprise during an active transaction. There won’t be a need to get ready for a transaction, the business and the team will always be ready. 

In future articles, we’ll dive into the different stages of the M&A process, including the letter of intent, due diligence, agreements, closing, payment, and post-closing integration. ​