The merger and acquisition process can be a difficult one that requires patience, compromise, attention to detail and some high-level research. It’s a tough process to navigate, from finding a deal to closing a deal. It’s even more difficult when it’s your business on the line. There are many pieces to the M&A puzzle, but we’ve put together the top five steps you can take to make your merger and acquisition process a smooth one:
Step 1 – Find The Best Deal
Whether you’re seeking to acquire or merge, landing the best deal involves finding the best seller. The best way to find your best seller is through referrals and word of mouth. Inform your banker, your attorney, or an M&A broker of your interest in a deal and have them spread the word. The M&A process runs much more efficiently when there are a plethora of sellers to choose from, as opposed to a handful of bad ones. The more people who know about your business deal, the better chance you have of making the deal. Work on widening your pool of prospective sellers to find the most ideal candidate (and price) for your deal.
Step 2 – Examine The Culture
Culture plays a bigger role in business transactions than you might think. You want to trust the people you’re doing business with. You want to be able to take them out to lunch, talk a little bit about life, and then get down to business. No solid work relationships exist without some personalized touches. Whether you’re merging or acquiring, you want your business in the hands of the right people. It certainly shouldn’t be the deciding factor in your M&A process, but your personal feelings towards the new business owner and staff is definitely something to keep in mind.
Step 3 – Perform Due Diligence
You’re going to need a ton of information from your buyer, and vice versa. To make the process a little less stressful on both of you, send a complete list of all required information at one time. Avoid exchanging information in bits and pieces. The buyer wants to review everything they need before they begin gathering everything, and you want their paperwork to be as organized as possible before you begin due diligence. You should also get other key members of your business involved.
If you are the buyer, make sure your IT, Marketing, and Administration departments are talking with the seller’s IT, Marketing, and Administration departments. Having these departments in communication will help eliminate surprises and will allow you to better prepare for the operation of the business after the deal is done.
Step 4 – Structure Your Deal
Something to remember about the M&A process: it must always be a win/win situation. For a merger or acquisition to be successful, or even make it to the closing table, both parties need to be comfortable with their end of the deal. If you feel you have a win/lose situation on your hands, be prepared to negotiate, then wait, then negotiate some more, then wait some more. However, if you’re on the “winning” end, don’t push your buyer away with a lack of compromise. You may have to budge just a little to seal the deal with your best buyer.
Step 5 – Assess Business’ Value
If you’re the buyer, be sure the business you’re investing in is worth an investment. Is the business currently profitable? If not, do you have a plan in mind to make it profitable? Buying a business is much riskier than selling a business because future financial success is never guaranteed. If you have a brilliant plan to boost revenue, first make sure that there is sufficient revenue to boost. Review the current value of the business, it’s financial history and everything in between before making the final decision to buy.
Remember, the M&A process is a complicated one. You might be putting time and energy into specific tasks that don’t require it. When you simplify the process through these five key steps, it’s easy to see how your M&A priorities and tasks line up, and what’s really going to get your deal to the closing table.
This was a guest post by our friends at LB&A.
LB&A, Certified Public Accountants, PLLC is a full service accounting firm with offices in Charlotte, NC and in Greensboro, NC. LB&A provides value-added services throughout the service delivery process to improve operations and ensure compliance with relevant regulations. LB&A takes a strategic and holistic approach to accounting that looks at more than just your business tax situation. LB&A works to understand your finances, your culture, your goals, and your aspirations. With this comprehensive understanding of your organization in place, LB&A is able to provide the best possible service, helping you protect and improve your organization’s fiscal health and well-being — for now, and for the future.
To learn more about LB&A visit https://www.lba-cpa.com.