If you’re thinking about buying a business or exploring growth, understanding how mergers and acquisitions work is a smart place to start.
Put simply, mergers and acquisitions, often shortened to M&A, describe two ways businesses combine. A merger is when two companies join to become one. An acquisition is when one company buys another and takes control of its assets and operations.
Businesses choose mergers or acquisitions to grow, reach new markets, gain skills, or improve efficiency. For example, a company may merge with a competitor to increase market share. A larger business may acquire a smaller one to access its specialist knowledge or customer base.
While M&A can create growth, the process is complex. It involves legal, financial, and compliance steps that need careful attention. With the right planning and legal guidance, businesses can reduce risks and achieve better outcomes. Astraea Law supports clients through every stage, from early advice to final agreements.
Do Mergers and Acquisitions Work?
Mergers and acquisitions can be powerful tools for growth, but not every deal succeeds. Success often depends on planning, timing, and how well the businesses fit together.
When mergers and acquisitions work well, companies may gain new markets, reduce costs, and strengthen their competitive position. A good example is when businesses with complementary skills combine to create a stronger service or product offering.
However, challenges are common. According to Harvard Business Review, “between 70 and 90 percent of acquisitions fail.” Cultural differences, unclear strategies, or poor integration can weaken the outcome, and many businesses underestimate the legal and compliance requirements, which can delay or even block a deal.
The key to success is preparation. Careful due diligence, clear agreements, and the right professional support make a significant difference. With guidance from an experienced corporate lawyer, businesses can reduce risks, protect their interests, and improve the chance of a successful outcome.
How to Do Mergers and Acquisitions (Step by Step)
If you want to know how to do mergers and acquisitions, this guide will show you how M&A is carried out with clear actions and checkpoints.
1. Strategy and Target Fit
State your intended outcome in one sentence. Example: “Acquire a Queensland competitor to lift revenue by 20% within 18 months.”
Once you know your requirements, set specific guardrails. That includes maximum price multiple, minimum revenue and EBITDA, industry, geography, customer overlap, and culture.
Then you can build a target list of 5–10 companies that meet those rules. Nominate a small deal team and give each person a role.
2. Early Engagement and Confidentiality
Make first contact with the owner or CEO. Ask them to sign a confidentiality agreement before you share non-public information.
Share a short teaser only. Include revenue and EBITDA range, product lines, top customer concentration, headcount, key licences, and major contracts.
Record the main points in simple heads of terms. Note the indicative price or range, share sale or asset sale, timetable, diligence scope, and any exclusivity.
3. Due Diligence
Open a data room and request core documents. In due diligence, you’ll review three years of financials, tax returns, key contracts, leases, licences, employee data, and more.
Review each area and rank issues high, medium, or low. Escalate change-of-control clauses, undisclosed liabilities, and missing consents.
Confirm the approvals you will need so timing stays realistic.
4. Valuation and Deal Structure
Normalise EBITDA and pick a suitable valuation method. Apply a market multiple or another method that fits the business. Adjust for net debt and working capital to reach enterprise value and equity value.
Choose a structure based on risk and operations. A share sale keeps operations intact but includes liabilities. An asset sale lets you select assets but may require new contracts and licences.
You should match payment terms to risk. For example, pay a completion amount, hold a small escrow for warranty claims, and link an earn-out to revenue or gross profit.
5. Terms and Documentation
Move from the term sheet to binding documents. Typical items include a Share Sale Agreement or Business Sale Agreement, Disclosure Letter, warranties, indemnities, restraints, employment or consultancy agreements, IP assignments, lease assignments, and any transitional services agreement.
Define price mechanics in plain terms. Use a locked-box or completion accounts approach. Set a target working capital and a clear formula.
Set warranty limits so expectations are clear. Define caps, survival periods, and claim thresholds.
6. Approvals and Completion
Prepare board and, if required, shareholder approvals.
Secure lender, landlord, and third-party consents. Lodge any required filings, such as ASIC forms, and arrange PPSR releases where relevant.
Finalise a concise completion checklist and funds flow. Sign and settle against that checklist to keep timing and payments clear.
7. Integration and Post-Completion
Run a Day-1 plan for staff, customers, and suppliers.
Phase system access, payroll, policies, brand, and reporting over 30, 60, and 90 days.
Complete novations and IP transfers. Track earn-out measures, release escrow when due, and finish any filings. Keep a simple calendar so tasks do not slip.
Why Work With Astraea Law for Mergers and Acquisitions
You want a deal that finishes on time and on terms that protect you. Our role is to make each step clear, keep risks visible, and move the matter forward.
- End-to-end deal support: We help from the first strategy through to post-completion. That includes NDAs, heads of terms, due diligence, structuring, documents, approvals, completion, and integration.
- Practical and clear documents: We draft agreements you can read and use. Warranties, indemnities, restraints, completion accounts or locked-box terms, earn-outs, and disclosure are set out in plain terms.
- Coordination with your advisers: We work with your accountant and tax adviser so legal, tax, and finance decisions align.
- Multilingual capability: We can advise in English, Mandarin, and Japanese. This helps where owners or stakeholders prefer another language.
- Local presence, national reach: We are based on the Gold Coast and act for clients across Australia. Remote data rooms and e-signing keep matters moving.
Ready to move forward with a merger or acquisition? Contact Astraea Law to set up your first call.
Ready to Make the First Move?
A merger or acquisition can unlock real growth, but only if the deal is structured right from the start.
With Astraea Law on your side, you don’t have to second-guess the process. We’ll help you define clear terms, manage risk, and handle the legal work so your deal moves forward with purpose.
You might be planning to acquire a competitor, sell part of your business, or simply explore your options, and we make the steps simple and the outcomes more certain.
Book your first call today and get the legal clarity you need to move with confidence.
