This is a difficult question to answer. Of course your budget (in both human resources and dollars) will vary depending on your capabilities and the size of the transaction.
Acquisition is a substantial task to take on so ideally you would have at least one person that is 100% dedicated to running the M&A project – and really think of it as a project.
There are a few ways to look at the financial budget. First, it is likely to reflect the size of your organization. You can calculate it by thinking about how many people you would dedicate to the project. For example, if you have three to four people involved in the acquisition process, think about what it would cost you to pay those people. This can be one way to calculate a dollar amount.
Another way to approach this is to think about the size of the transaction you’re looking at. A rule of thumb is to budget about 10% of the transaction value. For example, with a $10 million transaction you would budget $1 million for the process, including legal fees and completing the transaction.
As I mentioned earlier, this is a tough question to answer. Determining your budget also depends on the target itself. How far away it is from what you’re currently working? The farther away it is, the more work will be involved when it comes to market research, understanding the business, and integration.
Although I can’t provide an exact equation, hopefully this post has given you some ideas.
