Top tips for a successful merger or acquisition
Planning a merger or acquisition requires a similar mindset to planning a business exit. Here are some key things to bear in mind.
Understand your own business
Carry out a thorough review, with particular focus on your corporate objectives and stakeholder expectations. Once you have a strong understanding of the entire business, stay up to date with how developments affect it.
Write a wish list
Identify what kind of company you want to merge with or acquire, but don’t get too caught up with financial performance. A complimentary culture can be far more important for success.
Most mergers and acquisitions require funding, so examine your options. If you’re not keen on traditional methods of finance, you can try a business angel or another type of investor.
Be clear about what you are buying
Once you find a suitable business, make sure you know exactly what you’re getting. Both financial and legal due diligence plays a huge role in this. It helps you to understand where the value of the business rests, whether it’s in the products, customer base, key contracts or intellectual property. You can also determine how much of the success is reliant on key members of staff, and whether they are happy to join the new business. Due diligence also helps to expose any issues that could affect you going forward.
Be tax wise
Tax should be viewed as a business cost that can be reduced, so take advice on how to structure deals in the most tax-efficient way possible to minimise your liability.
Maintain a strong paper trail throughout the deal, as this will greatly enhance the due diligence process when you come to exit the business.
Make a clear plan
A detailed plan for the merger or acquisition will greatly increase the chances of its success, but remember to take into account all aspects, such as people, processes and branding. Try to see it from the perspective of the other company as well to make the transition as smooth and simple as possible.
Legal, tax and accountancy advice will be crucial, so keep your advisors close to you throughout the process. This isn’t simply about minimising risks, but maximising opportunities as well.
Acquisitions are hard work and the point of completion is a time to celebrate. However, arguably even more important is the integration process and it is often this stage which determines whether the merger achieves your expectations. Plan ahead during the acquisition process so you can begin the integration in day 1 of the merger.
There is likely to be a period of negotiation before the deal is done. Our negotiation need-to-knows will help you get the best deal possible.
Walk away if you’re not sure
Don’t be afraid to walk away from the deal if it isn’t working out. This may even help you to get what you want from the business in the long run.
Chris Wilks is Head of SA Law's Corporate and Commercial department.