Every every day, there are stories in the financial press of merger and acquisition deals in SMEs and major corporations. While boosting revenue or gaining exposure to a new client base are typically the primary motivations for businesses to enter into M&A however, it is crucial that they have a well-thought-out strategy to ensure that they succeed.
A successful M&A involves a complex process and the end result depends on many variables that have to be considered by both parties. A well-run management team is crucial to ensuring that your business is able to be successful in the M&A process. Employing trusted external consultants and accountants to assist in this process could improve the overall credibility of your M&A strategy.
The first step in the process is to conduct an exhaustive financial health check on your business. This includes reviewing the statements of profit and loss as well as evaluating cash flow as well as analyzing debt/equity ratios and determining if you have the financial resources to pursue an M&A deal. The financial health check will reveal any ambiguities in your Management Accounts and Statutory Filed Accounts that could cause confusion for potential buyers.
The cost of integrating both companies is an additional aspect. This can include physical costs like merging offices, systems, and employees. Or it could be in terms of human capital costs, for example, taking into account the cost of compensation and benefit programs. Engaging experts in human capital early in the process can allow you to properly assess the costs involved and incorporate them into your negotiations on price.
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