Imagine you’ve just joined a Merger & Acquisition (M&A) team. Your manager calls you and says, “Deepanshu, our client wants to acquire a company. We have six months to complete the deal.” That’s all the information you receive: no valuation, no due diligence, no financial model, nothing. This is how many Merger & Acquisition engagements actually begin.

If you think the process is simply about one company buying another, you’re only looking at about 10% of the picture. The remaining 90% is spent answering one crucial question: “Should we really acquire this company?” Every subsequent step from strategic analysis and valuation to due diligence, deal structuring, negotiations, financing, regulatory approvals, and post-merger integration is ultimately focused on finding the right answer to that question.

Merger and Acquisition are two distinct concepts. A merger occurs when two companies combine to form a single entity, whereas an acquisition takes place when one company purchases and gains control of another company. Although these terms are often used together as “M&A,” they represent different types of transactions. For the purpose of this discussion, we will focus exclusively on acquisitions.

In any merger & acquisition, a company is not just buying another company’s historical financial performance; it is acquiring its present capabilities and, more importantly, its future potential. But why would a company choose to acquire another business instead of building everything on its own? Think of it this way: you want to cool a bottle of water. You have two options you can put it in the freezer and wait 30 minutes, or you can spend ₹5 to buy some ice and cool it instantly. Both options achieve the same result, but the better choice depends on how valuable time is.

The corporate world works in much the same way. Suppose a company manufactures electric scooters, and customers are demanding batteries with a longer driving range. The company can either invest years in developing battery technology from scratch or acquire “LTC Limited”, a company that already manufactures the required batteries. By acquiring LTC Limited, the scooter manufacturer gains immediate access to proven technology, expertise, customers, and production capabilities instead of building them over time. This is the essence of an acquisition.

M&A doesn’t only see the fiinancial numbers, there are plenty of questions that are required to be answered first, before even stepping up in the process. Inlcuding,

• Will this increase market share?/
• Can we cross-sell out products?
• Will margins improve?
• Will customers stay?
• Can we integrate operations?
• Can we finance the acquisition?
• Will shareholders support?… and many more.

Why Merger & Acquisition?

The merger and acquisition, may begin because of different issues including,

• Stalled revenue growth (Acquire or merge with a fast-growing company)
• Competitor is becoming too strong (Acquire the competition)
• Technology is outdated (Acquire the technology company)
• Need expansion (Acquire the company with a wide distribution network)
• Suppliers have pricing power (Acquire the supplier)

Role of Due Diligence in Merger & Acquisition.

Imagine you’re buying a house, and the seller shows you freshly painted walls, beautiful furniture, and elegant lighting. Everything looks perfect until after the purchase, when you discover foundation cracks, plumbing leaks, electrical faults, and unresolved legal disputes. Now imagine those hidden problems costing not ₹50 Lakhs, but ₹5,000 crore. That’s exactly why due diligence exists in Merger & Acquisition.

Due diligence is the process of independently verifying a target company’s financial, legal, operational, and commercial information to determine its true value and identify any hidden risks or misrepresentations. For example, management is unlikely to highlight that a major customer is about to leave, significant legal notices are pending, or internal controls are weak just before any merger & acquisition. Instead of relying solely on management presentations, the buyer performs an independent investigation to ensure the acquisition decision is based on facts rather than appearances.

Role of analysts in Merger & Acquisition deals

You are not deciding whether to buy the target company, but gathering and analyzing the information so the decision makers can make informed choices based on;

• Financials model
• Cleaning large data sets
• Reviewing contracts
• Calculating EBITDA adjustments
• Coordinating information requests
• Preparing board materials… and many more.

You have to answer whether the target is a right fit. The purpose is not just to buy the company, but to create value greater than the acquisition costs.

The Deal Process

Imagine you joined KDEP Deal Advisory, and on Tuesday morning, your parner receives a call from the CFO of a listed company, and the CFO says, “We have INR. 15,000 crores available, and we are looking for acquisition opportunities.”

It must be noted that the board does not search for the targets, instead, it authorizes the management.

Board: “Management is authorized to evaluate acquisition opportunities in the EV components sector up to ₹12,000 crore, subject to further board approval.”

Now the management begins the search.

Who finds the target?

Many people think CEOs do. In reality, target sourcing comes from multiple channels:

• Investment banks
• Industry contacts
• Private Equity Funds
• Management teams
• Internal corporate developement teams

How is the target finalised?

The team doesn’t pick any one company, instead, it has a long list which may contains dozens of companies. Then the long list is filtered based on plenty of questions including,

• Is it even for sale?
• Is the technology relevant?
• Is the business profitable?
• Are there any regulatory barriers?
• Does it fit the buyer’s strategy?… and many more

Eventually, only a handful remain.

What is a Teaser?

A teaser is a concise, anonymous marketing document designed to generate initial interest among potential buyers or investors for a company up for sale. Typically restricted to one or two pages, this “blind profile” outlines the company’s core business model, key investment highlights, and high-level financial metrics such as revenue and EBITDA trends while strictly withholding identifying information like the corporate name or precise location.

By presenting a compelling yet masked snapshot of the opportunity, it can safely gauge market interest and screen candidates without compromising the client’s operational confidentiality. If a recipient finds the teaser appealing, they must execute a formal Non-Disclosure Agreement (NDA) to advance to the next stage of the transaction and receive detailed, identified company data.

It is important to note that acquisition discussions are typically kept highly confidential. If news leaks that a listed company is planning an acquisition, it can significantly impact the company’s share price, invite interference from competitors, create uncertainty among customers, and reduce employee morale and productivity. To prevent such consequences, confidentiality is maintained from the very beginning of the transaction. Before any meaningful or sensitive information is shared, both parties usually sign a Non-Disclosure Agreement (NDA). An NDA does not guarantee that the transaction will take place; rather, it establishes a legal framework that allows both parties to exchange confidential information and conduct discussions securely throughout the acquisition process.

What is an Information Memorandum?

Once the buyer signs the NDA and expresses interest, the seller shares the Information Memorandum. It is a detailed marketing document that provides prospective buyers with a comprehensive overview of a business for sale. Unlike an anonymous teaser, an IM is only distributed after a potential buyer signs a Non-Disclosure Agreement (NDA) because it reveals the company’s identity and contains highly sensitive operational and financial details.The primary goal of an IM is to give qualified buyers enough information to perform initial analysis.

Thereafter, both the management may interact, and go through the questions, and answers. Based on which, the buyer may decide any of the following:

• Proceed
• Pause
• Walk Away

We will look after more in the next part. Click here for the Next Part