Mergers and acquisitions can be difficult, delicate deals to complete. They can prove a tricky balancing act of doing what’s best for the two (or more) organizations involved while being careful not to upset too many of the key stakeholders.
A number of factors – including the Covid-19 pandemic and the trade disagreement between the US and China – meant mergers and acquisitions were less prevalent during 2020. There’s no denying, however, that M&As – if done right – can prove to be hugely beneficial for all parties involved. Here, we’ll focus specifically on mergers and on how smaller businesses can approach them to ensure the best possible outcome.
Valuations
A comprehensive and careful financial assessment of all parties needs to be undertaken before a merger can even be considered. This enables all stakeholders to be presented with a full picture of the facts before they can move forward. If, for example, one of the businesses has a large amount of unpaid debt or other liabilities, then their prospective partners are unlikely to want to take that on.
Structures
The structuring of the new enterprise can often form one of the most challenging aspects of a merger, as it could require a compromise from both sides of the deal. There are plenty of considerations to take into account, such as tax issues and share allocations, so when it comes to restructuring and insolvency it might pay to call on a third party to help with the finer details of the transaction.
Leadership
There are plenty of theories about the importance of leadership in business and it will be a crucial consideration for any merger. It’s likely that owners of small organizations will have become accustomed to running things their way, which can cause problems when it comes to working with another individual at their level. As part of the restructuring, it’s vital to outline how the hierarchy will operate and ensure all parties are satisfied with any agreement.
Branding
There is also the tricky topic of branding. Will the new organization retain one of the original companies’ branding? Will it use a combination of both, or is it time to implement wholesale changes? With brand awareness key to a business’ success, it may be that one side of the merger has to forego its name and logo if the other benefits from far greater recognition.
