Five Tips For Executing A Successful Merger And Acquisition

Posted: 17th December 2018 16:38

Today's business environment is characterized by cut-throat competitiveness, and this state of affairs makes it hard to grow revenues more so with the global economy that is growing at a plodding pace. As such, companies are looking into ways of diversifying their options of growing and becoming successful. One of the methods of achieving this is through mergers and acquisitions.

However, it is important to point out that mergers and acquisitions are not for the timid business minds. A merger or acquisition is an arduous route of growing the success options of any company. It involves various processes that all have to go right. Moreover, a business may have different reasons for opting for a merger and acquisition (M&A). It could be to snuff off competition by buying up rival companies. It could as well be to better the chances of gaining new client based. For some companies, the reason is to have a seamless penetration into new markets. And for others, the move is purely based on the offer to save a business that's gradually turning into a sinking ship.

But whatever the reason for opting for an M&A, the entire aspect of it should be founded on having a robust strategy. If this is the route you see your business taking, then you have to review everything, from the market to the location of the company and even the economic and cultural impact of such a move. Taking such measures will ensure that you avoid signing up for a raw deal, which is a possibility when doing mergers and acquisition.

As such, you need to know that it takes to have a successful merger and acquisition. Given this, below are some expert tips worth consider as you consider a merger and acquisition:

1. Evaluate Your Liquidity And Financial Capability

When you put it into perspective, a merger and acquisition is more or less a financial transaction. As such, it is wise not to your financial stability when considering such an investment. Given the magnitude of doing most of these transactions, businesses should evaluate their liquidity and put it above their profit and loss statements. Therefore, you should ensure that your business has substantial liquidity that can support such a deal and further its assimilation for the success of the company.

As you review the liquidity, also do the same with the capital structure. And M&A will see the introduction of a new entity into the company and thus you should ensure that your business can handle the added strain. In short, you should ensure that there is enough capital or equity that can fund and maintain the merger and acquisition.

2. Put Together A Team

Once you are confident that you have what it takes to handle the M&A, the next move is to put together a team that will help with planning and strategizing for the merger and acquisition. It should be a group that comprises of internal representatives of the company from different departments such as the finance, human resources, sales, and marketing as well as other operations departments. It also is wise to include a few experts from outside that have experiences in doing mergers and acquisitions. The experts can consist of valuation specialists, accountants, lawyers, insurers, and investment bankers.

With such a team in place, it is easy to broker a promising deal can pave the way for a smooth M&A process. Keep in mind that, as the business owner, you are the chief representative of your company's interests in the merger and acquisition. As such, you have to take the lead role of ensuring that there are open channels of communication and cohesive thinking among the group members and across the table to the other party in the M&A deal.

3. Initiate A Target Search

Your team should help with the search and identifying an ideal company that is worth merging with or acquiring. This is where experts in the group will take strategic roles. For instance, the investment banker can help identify and evaluate prospective opportunities and determine if striking a deal may involve processes such as networking, screening and having influential contacts in the industry.

Sometimes, the target acquisition may not be an easy buy, and that is where you will step in as the business owner. You need to approach the other party with a compelling offer and convince them that the M&A deal is a financial and strategic fit for both companies.

4. Have An Acquisition Plan

With the team in place, you will need to re-evaluate your reasons for thinking of a merger and acquisition. That means you need to discuss the merger and acquisition with your group. The objective is to relook why the M&A is worth considering, the primary aim of such an investment, and the target business worth merging with or acquiring.

The team and you will discuss and come up with an elaborate plan for the merger and acquisition. Strategize on elements such as how to identify target companies for the M&A based on the value-added efficiencies of such an investment, how to finance the deal, and sustainability of the investment. The M&A plan will, therefore, cover issues such as the criteria for identifying and evaluating target businesses, the objective of the merger and acquisition as well as benefits to both companies and suitable methods for generating deal flow.

Overall, the merger and acquisition plan should establish your goals and have a measure for success. And this will see you review the primary reasons for considering the M&A as mentioned early on, above. With a plan, it is easier to make decisions that will benefit your business while also growing your newly acquired investment.

5. Establish Effective Communication Channels

Lastly, any successful merger and acquisition deal is a product of effective communication. Talks should not only be done when at the table, but they should also be a continuous thing. Holding productive discussions is essential in striking a lucrative deal. Therefore, you and your team should do everything possible to ensure that talks do not break down in the middle of the transaction because this can lead to significant losses to all parties involved in the deal.

The best approach to ensure there is effective communication is to appoint dedicated personnel from within your strategizing team that will oversee the seamless exchange of information between all parties to ensure everything is done above board and there are no misinterpretation or misconceptions about the merger and acquisition.