Mergers and acquisitions are extraordinary events in companies’ lives, during which both the seller and the buyer need expert mergers and acquisitions advisory.
During this process, the transition period will always be critical and will require the best professionals to carry it out successfully. Before deciding whether to acquire or merge with another company, a methodological analysis will be necessary to ensure the operation’s success.
Here we have compiled some tips from the best mergers and acquisitions advisory experts to help you in the process.
Know your potential partners
When you buy a company, you will also decide who you are going to work with. As in a selection interview, it is not enough to have a meeting but complete analysis. You have to check backgrounds, ask for references and talk to each of them. Also, as far as possible, knowing the opinion of employees, former employees, and suppliers of the potential partner will avoid nasty surprises. Many times things, and people, are not what they seem.
It is advisable to know in depth the partner of the merger or acquisition; you must know well if it fits their culture and objectives and be very transparent with the role, which will adopt each one after the transaction to avoid future surprises.
When you can, talk to the clients
If there is no confidentiality clause, determine what customers think and try to contact those who have left. Find out why. Read reviews and comments from them and learn about the viability of the future business from their reputation. The degree of satisfaction is a vital sign of how the company and its leaders are performing.
Check the accounting
Review the company’s books of accounts in detail and commission a thorough review (Due Diligence) to your company’s financial experts. Ideally, review at least the last three years, ideally five years. Look for abnormalities or any unusual, recurring entries. Are the books in order? Do they show any inconsistencies? If something goes wrong, the merger may have to be reconsidered, or a liability guarantee requested to protect against any irregularities, which could be detrimental to the company’s future profitability.
An expert should do the valuation to find the company’s market value, compared with its sector or similar structure.
Check for possible tax problems
Has the company had any tax problems? On many occasions, this indicates that they may occur again in the future. Therefore, always check all documents and make sure that the company is settling all taxes naturally.
Examine standard operations and procedures
Do a deep dive into the company’s operations. How are employee contracts and payrolls, are there detailed operating rules and procedures, are employees trained and aware of these procedures, and if so, do they follow them? If so, do they follow them?
The aforementioned Due Diligence should include financial, tax, legal, HR, logistics, and stock aspects.
Make sure that everyone is convinced and supportive of this merger or acquisition.
For a merger or acquisition to be successful, all parties must want it. We are not only talking about owners and shareholders, but also management and customers. Each party has to understand the companies’ vision, see the positive side of the merger and work together to mitigate the risks. At this point, why such a decision is made is not democratized in the company. Shareholder and management committee information is not available to all employees. And in many cases, due to the interest and viability of the operation, which may involve the company’s future, there must also be internal confidentiality.
Regardless of the motives, the whole process begins and ends with the strategy. The company’s valuation by a professional mergers and acquisitions advisory is an investment, not an expense, which I recommend for its independence and ability to reach market information. In case of any doubt, I recommend temporarily slowing down the M&A process and, if necessary, even stopping it: it is better a no in time than a wrong decision, with no way back.