Mergers and acquisitions have many moving parts. As a business owner, you not only have the responsibility to look out for your company’s best interests, but also the employees, business goals, reputation, and financials. Below are our top six items to consider for successful mergers and acquisitions.
1. Ensure you have the right advisor(s) on your team
Whether you’re selling your business, merging with another one, or doing the acquiring, the process can become overwhelming. You need the right team in your corner to help you make solid decisions and manage all risks involved. If you’re not a financial expert, bringing on a fractional CFO or outsourced interim CFO might be necessary. CFOs bring valuable insight, experience, and knowledge of the financial side of businesses. Many specialize in helping organizations transition through a merger or acquisition, bringing the experience needed to make the transaction go smoothly while keeping your best interests in mind. A fractional CFO can help you gain an understanding of your business finances, prepare necessary reports, and assist you through the entire process.
2. Be as fair as possible to all involved
At the end of the day, it’s business, which doesn’t always consider the feelings of all involved. That being said, doing your best to be fair to everyone who’s impacted will help the business have a better chance of thriving in the future. Transparency and honesty are key—both for the deal makers and the other affected parties (i.e. employees on both sides and sometimes even end customers). Be open to discussions and minor changes that leave the other party feeling satisfied with the outcome of the deal. No matter the size of the deal and business being acquired or merged, the best partnerships are formed on solid foundations.
3. Know your finances inside and out
Possibly second to the products or skilled team that your organization has to offer, finances are going to be at the top of all M&A conversations. If you don’t know your own finances, there will be no deal (at least not a fair deal). You should have a strong, clear understanding of where your company is financially today, where it’s going, and what’s projected to happen in the years following the deal.
Mergers and acquisitions offer great growth potential, but they also are known for putting at least temporary financial strain on the business. Does your company have the capital or funding strategies to confidently handle the process? It’s more than just about profit and loss—you need liquidity too. Cloud-based accounting solutions are ideal for offering up-to-date insights into your financials. If you’re not already running your back office on the cloud, we highly recommend making that transition prior to beginning an acquisition.
4. Reputation is everything
Unless you’re retiring, chances are this won’t be the last merger or acquisition you take part in as a business owner. In order to close the deal, your acquiree must trust you, and a great deal of that trust will come from your reputation. If you have been a part of a previous M&A, invite your acquiree to speak with your previously merged organizations. If you’re a first-timer, always conduct yourself in such a way that will make the other party happy to provide a recommendation for you in the future.
5. Mergers and acquisitions are about more than finances when employees are in the mix
While finances are a top priority, there’s a good chance that human capital is also part of the negotiations. Keep in mind that employees are real people with careers, values, families, and bills to pay. Communication and transparency are vital. All employees involved should feel valued, appreciated, and free to express their questions and concerns. Make affected employees feel as though they are a vital part of the change. This stems from solid leadership and the ability to communicate openly with employees at all levels. Should layoffs be necessary, it is your duty to advocate for their needs. Ensure a fair package is available for terminated employees—as mentioned above, remember that your reputation is everything.
6. Have clearly defined goals
What do you want out of the merger or acquisition? Is it to grow the company, gain market share, expand geographically, acquire resources, or intellectual capital? There may be multiple goals, but defining them by importance will ensure what you value most will be top priority. Your goals are the driving factor of the entire merger or acquisition process, so they must be clearly defined.
Remember, working with a financial expert, such as a fractional CFO, can give you access to guidance and recommendations on how to achieve your goals. If you are in the beginning stages, an outsourced CFO will be able to help you decipher which route is best to achieve your business goals, how much capital is needed, and what the process may look like depending on your situation.
If your business goals have you taking the steps towards a merger or acquisition, check-in with the above tips to ensure a smooth process that will help you achieve your goals while keeping employees satisfied and financials in check. If you need a hand along the way, we would be honored to assist your company during this process. Contact us to schedule a consultation and take the first step towards your company’s future.