Every every day, there are stories in the financial press about merger and acquisition transactions in SMEs and large corporations. While increasing revenue or getting exposure to a new client base are typically the primary motives for businesses to get into M&A however, it is crucial to develop a thorough strategy to ensure success.
A successful M&A involves a complex procedure and the end result is contingent upon a myriad of factors that need to be considered by both parties. A top-quality management team is essential to ensure that your company can be successful in the M&A process. External accountants and consultants can add credibility to your M&A strategy if you seek their assistance.
The first step in the process is to perform an exhaustive financial health check on your business. This includes looking over profits and losses statements and evaluating cash flow by analyzing debt/equity proportions, and finding out if you have enough liquidity to pursue an M&A deal. The financial health check will highlight any discrepancies between your Management Accounts and Statutory filed accounts, which can cause confusion for a buyer.
Another critical factor is to think about the costs of integrating both companies. It could be physical costs such as merging offices, systems, and employees, or it could be human capital expenses like calculating the costs of benefits and compensation programs. By involving experts in human capital early in the process, you will be able to effectively assess these costs and include them in your price negotiations.