The required coordination among interwoven business, human resources, intellectual property, financial and especially legal factors is often at least as intricate as the teamwork called upon when founding and solidifying a single company in the first place.
However, respecting the dynamics of melding two entities into a single company can ultimately strengthen nearly all vested parties in the long run. Be prepared to join your counterparts in laying all cards on the table, for better or worse.
Check Your Liquidity and Financial Health
Any strategic and private equity buyers worth their salt will enlist several advisory and buyer employee teams to perform intricate, thorough due diligence before pressing onward.
In addition to ensuring your capital structure can weather the strain and added responsibility of a merger, enlist a credit risk assessment company for public and private companies to round out the most comprehensive possible picture of your company’s financial outlook, debt load and viability as a potential future borrower.
Don’t even think about misinterpreting or overestimating your company’s liquidity. This is about much more than profit-and-loss statements.
Acquiring private companies can be especially tricky since selling companies are not scrutinized by public markets and buyers have few independently accessible sources of information at their disposal.
If the buyers cannot be categorically sure what they are about to buy and the obligations accompanying it and the sellers cannot bear significant added debt and access the appropriate equity-capital strategies for your balance sheet, it would be irresponsible to push the transaction forward.
Define Your Goals and Success Factors
Whatever motivates your merger, define your goals unambiguously. Your company’s past, present and crystal-clear ambitions for the future should be as plainly defined as they have ever been to anyone, including yourself. Process your competitive position and objectives through the filter of what you want to gain from this transaction. A few ideal questions are:
- Do you want to increase your company’s market share?
- Will you enter new markets contiguous to your current arena?
- What new products, intellectual capital or processes will you acquire?
- How will the merger increase your economies of scale and possibly position your company as the lowest-cost competitor in your market?
- Will merging eliminate a competitor while expanding a product line or improving vertical integration?
Maintain a relentless focus on your goals and make decisions that further them. Whatever your objective, a merger bridges a company’s present status quo with a desirable future. Your aspirations should serve as a litmus test when screening potential targets and carrying out due diligence.
Form a Trustworthy, Diversified Team
In almost any industry, most companies maintain at least the same three key divisions: finance, sales and operations and marketing. When orchestrating a merger, these are the most essential expert voices deserving representation throughout every step of the process. Never discount the value of detail-driven valuation experts, investment bankers, accountants and legal counsel, either.
No matter the exact composition, this transition team must work together and leave rogue ambitions at the door. If everyone’s eye isn’t on the same ball, thinking collectively and sharing information constantly and clearly, your merger reaches a terminal impasse over seemingly straightforward action points or move forward without addressing critical flaws capable of weakening the newly created entity in the future. In the end, everyone has to be ready, willing and able to fulfill respective responsibilities within their authority, whether your company is the buyer or seller.
Hire a Great Mergers & Acquisitions Lawyer
Savvy, meticulous legal counsel is the linchpin of any merger’s transition team. “Part-time” M&A lawyers need not apply. A transaction this intricate with so much at stake and so many moving parts in play at once calls for seasoned experts in complex, multifaceted agreements, deal structures and legal issues.
The best of the best are contentious, fast-moving creatures well-versed in the inner workings, business realities and overall structure that follows applicable M&A law. Being a skilled negotiator, draftsperson and advisor in one package who has overseen several such deals might as well be non-negotiable. Any worthy team should be rounded out with experts in other appropriate specialties such as taxes, real estate, intellectual property, data privacy, antitrust and cybersecurity.
other valuable tips:
The more advisors you can pull together who have previously worked together, the better. Will such a brain trust accumulate a massive bill? Almost certainly. Will these pricy specialists save incalculable money in the long run by weeding out major risk factors early in the process and forging the most practical solutions possible? Count on it.
In a sense, any merger is a beginning, an end and an evolution wrapped up into the same transition. One company absorbs another, but key employees, intellectual property and assets become part of something even bigger. The best circumstances see both sides execute a deal designed for their respective mutual benefit. Such transactions never come about easily, though.
For every merger ultimately realized as a rising tide that truly raised all ships, countless others have proven disastrous in the wake of bad faith, poor decisions and fractured communication during the transitional process. Among other precautions, these steps should vastly improve the chances any deal ushers in a fruitful future on the shoulders on the past and present.
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