The success of any deal depends on a variety of variables. The financial performance of the company being targeted and its projections is one of the most important aspects. A healthy balance sheet, and consistent revenue growth are excellent indicators. Other factors include cultural compatibility, the capacity to scale operations, and the presence of intellectual property such as trademarks and patents.
A successful deal also depends on a meticulous plan and execution. A thorough due diligence process can help you identify possible roadblocks and pitfalls, which can then be addressed in advance of the closing. This is particularly important in deals that involve an investment of a significant amount in stock or cash.
An effective method of deal sourcing is by establishing and maintaining a solid network of investors and professionals in the industry. These relationships can provide an early access to a variety of off-market opportunities that would otherwise not be available. For example a real estate developer might form relationships with investors and brokers to gain access to commercial properties before they are available on the market.
Acquirers often evaluate deal success against the objectives they set for the business that was bought including synergy growth and revenue growth. These targets are usually reached or even over-performed, which encourages buyers to believe that they have created value. However, this could result in a loss to the current business, which may struggle to perform in the manner expected after the acquisition.