Guide to Mergers and Acquisitions 

Part 1: Assessment and Planning 

The volume of mergers and acquisitions is currently at a 10-year low, with 2026 expected to deliver a rebound in M&A investment as outlined in the Bain & Company in their December 2025 market analysis. The drivers for M&A moving forward will remain influenced by technology disruption, continued globalisation and scaling, together with the need to modernise product and service provision based on disruptions, most notably from AI. 

However, according to the Harvard Business Review: “Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%.” 

So how can you maximise your chances of success in M&A, particularly in the unstable global market conditions we are currently experiencing? 

The Searchlight Consulting Guide to M&A 

Searchlight Consulting work extensively in M&A, and with Private Equity led investments in a wide range of companies, from SMEs to Fortune 500 companies.  From our experience, we have distilled some lessons learnt that we’d like to share with you over a set of three articles, covering: 

• Part 1: Due Diligence: Assessment and Planning 

• Part 2: Separation & Merger: Transitional Service Exit 

• Part 3:  Value Creation: Capability Uplift and Value Realisation 

Part 1: Due Diligence: Assessment and Planning  

M&A opportunities are among the largest and most complex investment cases that most companies will face.  To maximise value and minimise risk in this exercise you need to identify the main levers of value and risk, then assess the potential of each metric to affect the key decisions on buy or walk, price, and conditions of purchase. 

Assessment  

The key tasks in identifying the best M&A opportunities are: 

Operating Model Capabilities: assess the business and IT operating model maturity; understand the level of capability uplift that may be required to align and enable the investment rationale; understand the upgrade implications and impacts associated with people, process, insight analytics, data, technology and compliance drivers; assess and understand the level of change and/or distribution associated with the operating models, the customer product and service proposition, and business plan. 

Application and Technology Landscape: with an eye on the current business and IT operating model state and investment rationale, understand the business application and technology infrastructure current state; assess the current operating capability; establish the components that are nearing or are already end-of-life; assess the technology roadmap options; and prioritise the investments to enable separate or merge an organisation and then enable subsequent value creation. 

Operation Run and Value Creation Risks: the assessment of the business and IT operating model must identify possible risks to the steady state operation prior to M&A, during a transitional service period and post M&A; the risks assessment and mitigations should once again consider people, process, insight analytics, data, technology, and compliance, as well as business operational and financial performance. 

Top Tip: often a sellers Information Memorandum (IM) will be presented with a draft Transitional Service Agreement (TSA), it is critical to perform operating model, application and technology infrastructure assessments, and risk analysis, to ensure a draft TSA can be established, based on an appropriate level of M&A planning and business as usual service delivery management. 

Planning  

Once the initial assessment has been completed (which would cover commercial, financial and operational due diligence), planning would need to commence to validate the cost of M&A typically outlined at a high level within the IM. Planning should focus on 3 dimensions: Day 1 readiness; minimal viable product and service to exist through the transitional period; and running the business on a day-by-day basis. 

Day 1 Readiness: clarity will be required with respect to: 

• Business Continuity: ensuring business operations and the enabling technology, are all supported within a TSA in terms of service levels and charges; consideration will be required with respect to novation of technology products and services; are all costs are covered within a TSA standing charge?; in-addition, can existing contracts be novated, will they need to renegotiated and the key is to understand if there is exposure to double charging, within a TSA charge and to enable exit from TSA. 

• Day 1 Operational Changes: will require stakeholder engagement and change to working practices and typically include company incorporation, indirect tax registration, and employment changes. Where feasible it is recommended to minimise changes for Day 1 (on agreement of deal) and focus only on the legal ownership transition on the initial day and constrain the level of change. 

• Operations and TSA Governance: the business will need to run to agreed service levels through transition period and focus on the exit from TSA; separate governance forums will be required to control the appropriate resources committed to agreed KPI’s and SLAs, and to satisfy the TSA Exit Criteria. 

• Transitional Service Agreement Exit: the TSA should consider the due diligence assessment and planning levels, rather than being a framework based on a sellers initial IM.  

Transitional Service Agreement: key components will include: 

• Service Level Agreements (SLA’s): the SLAs should be detailed to include both operating the business and supporting the TSA exit; the SLAs should guide and govern the TSA process, with clear penalties, mitigations and intervention actions that are required if SLAs are not achieved. The same level of diligence and rigour needs to be applied to TSA SLAs, as would be applied to outsourcing a managed service to a 3rd party service provider. The SLAs need to clearly define the quality and security levels required to operate the business, especially in business support functions, such as finance, HR/Payroll, legal, compliance and IT. The SLAs need to be quantifiable and measurable, with actual performance reported on a regular basis. 

Service Provisions:  

• business as usual (BAU) services, with any restrictions and limitations should be defined; often TSA’s state change will not be supported, however this is not typically viable as system patching and maintenance, data management, product and service trading will trigger the need for business or IT enabled change. The TSA should have provision to undertake change. 

• transitional services, should also be detailed with any restrictions; again, changes to the current technology landscape will be required, such as data extraction and separation, hence the input from the planning and due diligence assessment will be key to shaping a viable and equitable TSA.  

• Resource Commitments: resource in terms of people (seller internal and 3rd party resource) and technology products and services, should be detailed, based on agreed transitional services, with charges detailed; SLA’s and where penalty charges will be incurred to increment resource commitments should be clearly defined in the TSA; with consumption, availability and ability to deliver to agreed transitional technology products and services will be a key measurable metric throughout the transitional period, up to TSA exit. 

Business and IT Operating Model Plans: the final component associated with planning should focus on the required transformation of the business and IT operating models. From our experience, focus through the transitional period should be on progressing towards the TSA exit criteria, with minimum change to the business and IT ways of working. However, it will be key to understand the target operating model, so informed decisions can be made from Day 1, through transition and at TSA exit, to ensure that the future business and IT operating model requirements and capabilities can be enabled through the Value Creation phase of an M&A process: 

• Business Organisation Transition: define what are the business capabilities and talent needed to operate the business at the different transitional stages; define the capability uplift that is needed and how will this be achieved, through training, hiring, and technology enabled change or technology disruption (i.e. AI implications). 

• Process and Data: assess if the current business processes will impede the business operational performance, and are changes needed ahead of the value creation phase; define how data will be governed; identify business process owners within the new company and understand the required skills to ensure business processes and data are maintained and used as strategic assets. 

• IT Operating Model: assess if resourcing and skill levels are appropriate for the levels of revenue and customer service: assess if the existing IT capabilities offer added value, or do they represent a risk and cost due to high technical debt; define the separation working hypothesis and how might this impact commercial and financial dimensions; consider if there are significant cyber security risks to the data and systems. 

Top Tip: use the draft TSA created during the IM phase to shape the design of the actual TSA, which will require input from due diligence assessment and planning, and agreement from all parties, to ensure a fair and equitable TSA is established and the impacts, dependencies and exit criteria are understood. 

So, in summary, the due diligence phase for mergers and acquisitions requires careful preparation regarding both in assessing the current state and identify critical actions and activities. The agreed transitional service agreements need to clearly define the obligations of all parties, the level of service that will be provided, the charges and penalties, and the desired exit criteria. 

Contact Searchlight Consulting for more information on how we can support your M&A due diligence.  

In the next article we will describe the TSA transition and exit phase where a balance typically exists between speed to exit and minimising impacts on the business operation. Follow our blog to stay updated! 

Contact Searchlight Consulting today to learn more about how we can help with your digital transformation.  

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