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Right Time Right Fit Right Price

The M&A market remains active as companies seek to capitalize on a productive environment to search for opportunities to scale operations, add capabilities and increase market penetration. Pursuing M&A activities, though, requires a wide variety of considerations, from financing options and rising valuations, to supply chains and company culture.

Evaluating Targets: Due Diligence

Right Time - Expand Your Business

A comprehensive due diligence process is needed to determine if a target company is a right fit. Businesses must think critically about their unique criteria for a potential M&A target and what strategic objectives will be supported through expansion.

Potential acquirers should consider the supply, customer and employee bases of a target company.

  • Analyze where it sources materials.
  • Understand its customer concentration and their loyalty to estimate potential performance.
  • Evaluate its culture. Shared values can lead to a smoother, more productive transition.

A buyer also needs to examine its own ability to prioritize resources to support a merger or acquisition, especially when time and capital are temporarily limited while the deal is being completed and returns have not yet been realized.

Valuation Volatility

With many companies coming off strong years, valuations have spiked, and buyers face an inherent risk of overpaying for M&A.

Before committing to a deal, buyers should recognize that a target company’s peak performance is unlikely to continue indefinitely. If a buyer is willing to complete a deal at a target’s peak cash flow valuation, they must be confident in research that shows the valuation is fair and performance can be sustained.

Financing Options: What is Best?

Once a buyer is ready to act, it needs to decide the best way to finance the deal.

There is excess capital and an influx of private equity in the market, and many businesses find themselves with additional cash at their disposal. While interest rates have begun to climb from their previously historic lows, there remains a range of viable financing options.

Engaging finance partners early in the process can help determine an appropriate offer price as well as capital and credit strategies. To find the right financing solution, buyers should work with their lender to consider:

  • What types of financing make the most sense — senior debt, mezzanine or otherwise? What amount of each are they willing to incur?
  • How much equity are they willing or required to contribute?
  • How much risk are they willing to assume?
  • How much working capital and fixed asset financing (such as for machinery or real estate) will be needed? How will it impact operating cash flow?

It is to the buyer’s benefit to work with a partner they know and trust as they navigate the financing process. This is especially true during times of uncertainty, when a knowledgeable advisor can assist in assessing the impact of geopolitical events, such as the evolving situation in Europe, economic trends and other factors.

Manage Transactional Risk

Risk analysis and management is part of any transaction. FNB has solutions to protect your company’s interests, including Representations and Warranties Insurance (RWI) coverage for M&A deals. Learn more about RWI in the Manage Risk section of the Business Knowledge Center at

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