Great Tips on Mergers and Acquisitions
By
VendorSeek
It is a conventional enterprise these days for businesses to either commune together, or for one to purchase and acquire another. If you break it down, there are probably only about a dozen juggernauts who own just about all businesses. The nature of the endeavor entails a chance at the thrill of victory, or the agony of defeat depending on the turnout. A good deal of studies have delineated the fact that more than half of mergers and acquisitions have either gone sour or had to be compromised in some way, shape, or form.
One of the unfortunate truths of life is that it is lived forwards and best understood backwards; one of the major downfalls of failed mergers and acquisitions was that they were not thoroughly planned and outlined from the onset. Of course, there are always negative surprises that appear upon the countenance of business, but there are some preliminary steps of awareness to be executed to make the best of the situation.
The following are some tips to consider if thinking about making a move in the merger or acquisition direction:
"Ready money is Aladdin's lamp"
 Clever First Steps Prepare to do a great deal of homework and research before even considering a merger or acquisition. Not only peer into the other companies in mind, but also think about how they will augment your own business and exactly what you are going to do with them once the move has been executed. Your strategy should propel the merger or acquisition process and not vice versa. Calculate the reasons why this other entity is a good fit for you, if becoming a part of it will change any positive attributes of both businesses, and if it will after all, be a move in the moneymaking and success direction for you.
Do Not Be Impulsive Most likely, the concept of a merger or acquisition came to mind in the first place because it was projected to ultimately make your business flourish and make more money. One must really use their sense of patience and resist being impulsive if the deal initially looks attractive and rewarding.
Going Through the Process There are two general paths to walk in merging and acquiring another business. One can buy shares of the company of interest or purchase their assets. Depending on where your business is and where it wants to go; these two processes can be very different and have varying repercussions for you. By limiting your own liability, there are several ways to consider the tax savings and/or opportunities the move will create.
Try and get into the head of the other CEOs and executives of the company of interest. Some people will gracefully take a bow and let a merger or acquisition occur, and yet others will not so easily give away the empires that they have put their time, energy, and money into. Obviously, a series of meetings would be recommended, but you have to keep in mind that they are in business as well, and most likely will not be willing to put all their cards on the table for you to overtly analyze.
"Show me the money!"
Cost I won't waste your time by telling you not to overpay- (don't do it)! The nature of a merger is a bit different because it deals with the pooling of two entities; but as far as acquisitions go, they can be very expensive (especially if things do not go as originally planned for you). While going through an acquisition, always keep in mind why the executives would allow this to happen in the first place. Unless you have some dynamite new ideas for the business acquired, it is most likely that something is not exactly going as planned for them. Why would the executives allow a moneymaking machine to be let go? Do your homework from both ends; analyzing where your business is, where it is going, and what this acquisition will do to propel your business forward. From the other company's perspective, why would they allow themselves to be bought out?
Costly Legacy  Many people will be enticed by the concept of factoring in 'earn-outs' in the process of an acquisition. Essentially, 'earn-out' denotes that your initial purchasing price will be influenced by a projection of what the attainment of the other company will do for your own pocket. For the buyer, an earn-out can be an effective means of being able to pay a higher price, without having to raise it all immediately. Be cognizant that the increase will not be paid unless earned, and will be funded out of the business post-sale. For the business selling, 'earn-out' usually entails an opportunity to receive more money than would otherwise be offered for a fixed price deal. 'Earn-outs' can most definitely cause some dissension between the two parties amidst negotiations. The seller will usually know or be advised to maintain some form of legal status, control, or power of veto as far as the way in which the business is conducted post-sale, so their side of the 'earn-out' is successful. This causes more anxiety for the buyer as far as formulating long-term planning and integration. Make sure that all details are clearly outlined as far as both parties' interests are concerned before finalization.
Ethics The buyer in an acquisition must closely cogitate on the reason/s why it would be a point of interest for the seller to sell in the first place. In a perfect world, everyone would be a straight shooter, but we all know we are not in such a place, especially within the microcosm of business. Because you may be well endowed with a solid sense of ethics, it does not mean that you will necessarily be in business with others of the same sort; that is just the nature of the beast. Towards the tail end of negotiations, there may be a higher sense of pressure to 'seal the deal,' even amongst some doubt; do not feel as if you are doing something 'wrong' if you find out something unappealing about going through with the process. Remember that the reason to make this business move was to make positive strides for your business, unfortunately, when it comes down to it, you have to look out for number one, and it is most prudent to assume that the other business is exercising the same right.
"Money isn't everything - as long as you have enough of it."
Lean On Your Team Two heads are most likely better than one, so make sure that in consideration of a merger or acquisition, you invoke all of your resources. Choose the right team (inside and outside your company) to do research, map out the details, execute the transaction, and manage the decision after it is made. Again, please remember the vital importance of doing your homework. Make sure to factor in the expectance of the unexpected and make efficient use of all of your resources and options. Choose your team wisely, and don't worry about perhaps having to do some extra investing in order to comprise an A-team.
Manipulating the Minutes Time is of the essence. Devise a timetable for each of the parts of the process. Consider all pre and post-deal processes in constructing a timeline. Think about post integration issues, third party consultations, regulatory clearances, etc. Do not 'sleep' on any aspects of the process, but most definitely be sure to not make any rapid and insecure decisions that will only manifest themselves in a negative way at some point down the line.
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