In the financial press, stories about mergers and acquisitions in SMEs and large corporations are reported every day. While boosting revenue or gaining exposure to a brand new client base are typically the primary reasons for companies to enter into M&A however, it is crucial that they have a well-thought-out plan to ensure the success of the deal.
A successful M&A is a complicated process and the final outcome is dependent upon many factors that must be taken into account by both parties. A high-quality management group is crucial to ensuring that your business can effectively navigate the M&A process. External consultants and accountants can add credibility to your M&A strategy when you solicit their assistance.
The first step is to perform an in-depth financial health check of your business. This includes analyzing profit and loss statements and cash flow, as well as analyzing equity/debt ratio and determining whether you have enough cash to pursue a M&A transaction. The financial health check will identify 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 could be in the form of physical costs, such as merging offices, systems, and employees. Alternatively, it could be a matter of human capital costs, such as the calculation of the costs of compensation and benefit programs. Involving experts in human capital early in the process can help you assess these costs and build them into your price negotiations for purchases.