The first step in developing a strategy includes a top-down strategic vision based on the advantages of acquisition versus other approaches, such as joint ventures or organic growth. Clear understanding of the market sector in general and the strengths and weaknesses of all the players involved in particular will also help to inform the strategy.

This vision determines how the business approaches the deal: what is to be gained, likely targets or partners and the rationale for the deal. Coupled with this is the bottom-up approach, where lower-level managers or, in the case of a group, senior managers at subsidiary level are involved in the strategic process as they can highlight potential pitfalls
as well as more positive future developments that may be overlooked. They may also provide useful market information, such as a target’s strengths and weaknesses or specific opportunities.

Iidentify and select targets. When seeking a suitable acquisition or merger target, include the following:

• A target specification: attributes that are either essential or desirable for a target company to possess.
• The opportunities available in the sector and a list of potential candidates, ranked in priority order.
• What each target offers and how it will fit, in theory and in practice, with the business.
• Who to approach, how and when.

Ddecide specific objectives and understand how issues affect them. Be clear about the deal’s objectives, which may include gaining access to intellectual property assets or new markets, providing synergies with existing activities, increasing capacity, or simply removing a competitor.