Interviews

Successfully approaching mergers and acquisitions

4 min read

12 April 2018

A thoroughly researched and well-executed strategy could be the difference between failure and success when it comes to mergers and acquisitions, a business expert has revealed.

Mergers and acquisitions can eliminate the competition, allow companies to reach new markets and gain new customers. There are a multitude of benefits to enjoy from combining business interests and looking at a collaborative way forward.

However, these can only be achieved through a well-strategised, effective and focussed plan. So, here are my top tips for successfully approaching mergers and acquisitions.

Ensure you have shared goals

The first step is to ascertain that both companies have shared business goals and objectives. Is there anything you disagree on? Do you undertake different practices in relation to similar areas that could cause friction? These are questions that directors should pose from the initial discussions to identify whether the merger is in the best interests of both companies.

Strategise

Once you have ascertained an understanding with the company you are merging with or acquiring, it’s time to enlist the services of a business advisory specialist. An expert can assist companies on effectively restructuring the business, the legal implications, tax considerations following a transaction, and also any future business forecasts which could occur as a result of the new company structure.

Speaking to a specialist ensures that businesses receive tailored, thoroughly considered advice, which takes into account their future objectives and advises them of all their available options.

Have enough liquidity in the business

Determining financial stability ahead of conducting mergers and acquisitions is essential to safeguard the continued growth and success of your company. Available liquidity, or funds, is a frequently overlooked aspect, but it is among the most vital.

Not only is this important to establish in the company you may be merging with or acquiring, but it is also crucial to assess your own liquidity. Without assessing your available funds, entering into a merger and acquisition could put the business at risk, and make the transaction unsustainable.

Organise your due diligence

When merging or acquiring a business, it is essential that both parties provide sufficient financial information in a prompt and organised manner. By organising all the relevant information, this will assist in identifying any problems before a transaction progresses. This process is known as due diligence.

Due diligence allows buyers the opportunity to investigate the business they are purchasing to validate what has been claimed by the seller, and potentially, identify any red flags. As such, business owners planning a merger are frequently advised to undertake their own due diligence investigation within their company, to ensure any issues are identified at an earlier stage.

Likewise, companies planning to acquire a business should insist on receiving full financial and business disclosure from the seller in advance of the acquisition. Due diligence should include details of the structure of the organisation: assets, audited financial statements, intellectual property; contracts, employee records and tax records.

Office culture and staff integration

Mergers are acquisitions are very much the forming of a new organisation. However, each company involved in this transaction will have its own pre-existing teams who are familiar with their own company culture, policies, and areas of responsibilities.

Employees will automatically transfer in accordance with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Managers looking to blend teams and offices could ease the transition at an earlier stage by encouraging frequent communication between staff from both organisations. Ensure that they communicate openly from the start to establish an integrated and successful working relationship.

Craig Blackmore is director of Verde Corporate Finance