Updated April 30, 2025

Justin DePardo | Director: Corporate Development

For companies looking to grow, few strategies are as consistently effective as acquisitions. Research shows that businesses that pursue consistent, strategic acquisitions outperform their peers by an average of 2.3% in annual shareholder return. With the right deal, you can boost profits, strengthen market position, and create operational synergies that cut costs while increasing efficiency. But with over 70% of acquisition deals estimated to fail, understanding the buy-side M&A process is an absolute necessity. From initial strategy sessions to post-close integration, handling each step correctly can mean the difference between long-term success and complete deal failure.

While not every deal will follow the same sequence, and some stages may overlap, the process generally adheres to a consistent structure. Here are the nine steps typically involved in successfully closing a deal.

Step #1: Define Growth Strategy and Objectives

Before you start sending off outreach emails and offers, you’ll need to determine what exactly you are trying to achieve with an acquisition. This can be done by answering a few questions:

Are you trying to diversify or stay entirely within the same segment?
Is your goal to add recurring revenue?
Do you plan to expand into new regions?
Should your acquisition improve your position within an emerging market or novel technology?
Are you open to using debt as a lever for growth?
Are you hoping an acquisition will expand your margins, increase your valuation, or both?

Of course, your goals will vary depending on the specifics of your industry. For example, low-margin sectors like distribution typically look to add what we call “sticky” revenue, or income that is recurring and predictable. In those cases, we would look for targets with long-term contracts or subscription models.

Because each opportunity is evaluated through the lens of whether the acquisition will help you achieve your vision and desired growth, this first stage is incredibly important. Without a solid foundation, any deal you build out is more likely to collapse further down the line. Once we know where you’re headed, we can identify targets that will get you there.

Step #2: Source and Evaluate

Acquisition Targets Now that you’ve established your goals, it’s time to find compatible acquisitions that will help you fulfill them. An acquisition target’s compatibility is based on a variety of metrics, including financial performance, growth potential, market position, and cultural fit. These are compared against data drawn from sourcing tools like PitchBook and Alphasense, which filter companies based on industry, revenue, location, and numerous other factors. Advisors will combine this information with the objectives you established in Step 1 to determine how closely a target aligns with not only your goals, but your current business model. The higher the compatibility, the better the chance of post-acquisition success and long-term cohesion.

Step #3: Initial Engagement

One of the most under appreciated steps in this process is how you initially engage with a target. While strategy and sourcing are certainly important, outreach can be the defining factor when it comes to deal success rates. The first message you send to a company, the hook you use to get their attention to the way you sign off at the end, will set the tone for your entire relationship.

The goal here is to build trust. Don’t focus on why you want to buy them, but rather why they would want to sell. Approaching outreach with this type of sellside perspective will make your message more personal and therefore more likely to yield positive results. Sending out a flurry of generic cold emails will not only have a low hit rate, but damage any potential connection you could have formed with those companies. Instead, try less frequently used avenues of communication, like a phone call. Your mindset here should be to make a connection, not a transaction.

This idea—connection over transaction—is central to successful outreach.

In the short video below, we break down why building genuine rapport with the seller isn’t just helpful—it’s often the deciding factor in whether a deal closes or falls apart.

Step #4: Secure Financing

When it comes to M&A buyside financing, there are three basic ways you can secure an acquisition: debt, equity, or cash. Each has its own advantages and disadvantages depending on your business, growth objectives, and risk tolerance.

Option 1: Debt

Pros: Preserves ownership, interest payments are tax-deductible, often faster to secure than equity
Cons: Creates a repayment obligation, increases leverage

Option 2: Equity

Pros: Doesn’t add debt to the balance sheet, no repayments
Cons: Typically more expensive than acquisition debt, increases legal complexity, dilutes ownership

Option 3: Cash

Pros: No interest payments, debt obligations, or dilution of ownership
Cons: Reduces liquidity and working capital. Can limit ability to pursue future growth opportunities

What works best for you is highly deal-dependent, but we usually guide clients toward debt if it makes sense strategically. People have strong opinions on using debt for M&A buyside transactions; it seems like everyone either completely loves it or hates it with no in-between. But if you’re comfortable with it, debt can be really beneficial. Equity is always more expensive and often slower, and using cash (while seemingly clean and straightforward) can be risky for growing companies without ample liquidity or reliable incoming revenue. With debt, you get leverage without giving up control. As long as you have a solid plan and manage it correctly, it can be a powerful growth accelerator.

Step #5: Conduct Due Diligence

Due diligence is the phase where we decide whether the company you’re acquiring is actually worth the proposed valuation. There are typically two times you perform due diligence: a preliminary review before you send a Letter of Intent (LOI), and a more comprehensive analysis later on. While each involves different levels of scrutiny, both types aim to assess a target’s financial, legal, operational, and commercial health.

Unfortunately, this step is where buyers are most likely to stumble without professional support. Some of the most common due diligence mistakes we’ve seen include:

Not hiring a qualified M&A attorney: Bringing in your local business lawyer or a generalist instead of a specialized M&A attorney is one of the worst mistakes you can make. We’ve seen this result in truly atrocious deal results.
Skipping a Quality of Earnings (QofE) analysis: Without your own QofE, you’re going to have to rely on the seller’s version of the financials. This gives them an unreasonable amount of power in negotiations and frankly, makes you look unprepared. It can also lead to issues after the acquisition is complete. For example, without a QofE it’s difficult to peg net working capital correctly. This can lead to disputes over who owes what after a deal has closed.
Ignoring operational or compliance liabilities: Things like expired IP, unresolved health and safety violations, or unaddressed regulatory issues can render the entire deal worthless after close.

Improper due diligence can also result in one of the most expensive M&A mistakes: missing financial adjustments. If EBITDA is miscalculated even slightly, your valuation could be way off. For example: say you believe EBITDA is $10 million when it’s actually $5 million, and you agree to a 10x multiple, you’ll end up paying $100 million for a business that’s worth half that. You’ve just made a $50 million mistake, the entire acquisition’s value, all because due diligence wasn’t conducted properly.

Step #6: Establish Valuation & Deal Structure

If due diligence is done right, you’ll be able to determine a fair valuation of the target, a crucial element of any healthy deal. But having the numbers is only one part of the equation: A company’s size and growth stage are also necessary for calculating accurate valuations. For small to mid-sized businesses, valuation is commonly based on EBITDA, while high-growth companies may be valued based on discounted cash flow (DCF). Type of growth can matter as well: for example, high-value start-ups may require the use of precedent transactions, which can increase valuation accuracy by adding market context.

Whatever number you end up with, know that it’s simply a preliminary valuation, a starting point used to shape the initial offer. This will serve as the basis of your LOI, which comes before further due diligence occurs. The actual price won’t be finalized until after all diligence and negotiations are complete.

Step #7: Negotiations (From the Buyside Perspective)

The tone for how negotiations will go is set all the way back in Step 3, from the first time you contact an acquisition target. The hook you used to reel them in, the reasons they want to sell, the calm, respectful tone of your communications; all of this will play a role during this stage.

Effective negotiation is a balancing act. The interests of both parties and any potential conflicts must be taken into consideration in order to reach a mutually beneficial agreement on price, terms, and conditions. On the buyside, this will require you to apply the information and data you collected during diligence against your understanding of the seller’s motivations. You’ll also need to set up boundaries before you sit down at the negotiating table. Ask yourself:

What is the maximum purchase price you’re willing to offer?
What are your non-negotiables?
What would make you walk away?

Knowing your limits in advance can cut down on the chaos factor, preparing you for any eventuality so you can avoid overreacting. Remember, even if this deal doesn’t go through, you’ve already done the groundwork to establish a connection with this company. Why let a relationship, especially one that may result in a future deal, go to waste?

At the end of a successful deal, both parties should walk away feeling that they’ve won. That typically means a fair valuation for the seller and favorable terms for the buyer. Maintaining mutual respect in this way isn’t just beneficial for closing the deal, but as you move forward into integration.

Step #8: Closing the Deal

Once the terms and all legal documentation have been finalized, you’ll still need to make sure all regulatory and legal requirements are met. Staying compliant can vary greatly by industry: for example, a small tech company will likely need to adhere to numerous privacy and data laws but relatively few environmental regulations, while a municipal utility company would deal with the opposite. Much like in the due diligence stage, this is where a qualified M&A attorney becomes essential.

Once compliance is assured and all conditions have been met, the deal is officially closed. Ownership of the target company will transition to the buyer, and you can move on to the final phase: post-acquisition integration.

Step #9: Post-Acquisition Integration

While integration is often overlooked, it’s just as important as the deal itself. Without a transition plan in place, your acquisition can fail even after all the paperwork is signed. Successful post-merger integration will require not only an in-depth knowledge of both companies operations, systems, processes, and cultures, but a way to bring them together into a single cohesive entity. Although the acquired company may play a role, the majority of the responsibility for this final stage falls on the buyside. An experienced advisory team can be invaluable here by ensuring you both fulfill the terms of your agreement and maximize the value of your acquisition.

Who Handles the Buyside M&A Process?

Both the buyside and sellside aspects of M&A are typically handled by dedicated M&A advisory firms. These firms guide clients through every phase of the deal, from initial strategic planning until the final stages of post-close integration. Many firms employ experienced advisors, consultants, strategists, and lawyers trained to handle specific tasks throughout the M&A process. Without that support, the risk of deal failure rises significantly.

Missteps like poor outreach or missed diligence details are easy to make and hard to recover from. Once a deal collapses, any time or money you’ve already invested is lost. Without an advisory team, the success of your deal is largely left up to chance.

Takeaway

The buyside M&A process can be broken down into 9 distinct steps. These steps include:

Define Growth Strategy and Objectives
Source and Evaluate Acquisition Targets
Initial Engagement
Secure Financing
Conduct Due Diligence
Establish Valuation & Deal
Structure Negotiations
Closing the Deal Post-
Acquisition Integration

Each step involves complex, high-stakes decisions that can determine the success or failure of an acquisition deal. Working with an experienced M&A advisory firm can dramatically increase your chances of a successful outcome that works for all parties involved. If you have questions about the M&A process or want to discuss an acquisition, Embarc Advisors is ready to help.