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Every day, there are stories in the financial media of merger and acquisition deals that are being made in SMEs and large corporations. While increasing revenue or getting exposure to a new client base are often the primary motives for businesses to go into M&A, it is important that they have a well-thought-out strategy to ensure that they succeed.
A successful M&A involves a complex procedure and the final outcome is contingent on a variety of factors that need to be considered by both parties. A top-quality management team is crucial to ensuring that your company can be successful in the M&A process. Employing trusted external consultants and accountants who can aid with this process will add to the overall credibility of your M&A strategy.
The first step in the process is to conduct an extensive financial health check for your business. This includes reviewing the statements of profit and loss, assessing cash flow, analyzing debt/equity ratios, and determining whether you have the ability to fund an M&A deal. The financial health check will highlight any discrepancies in your Management Accounts and Statutory Filed Accounts that could cause confusion for buyers.
The cost of integrating the two businesses is another significant factor. It could be physical costs such as merging offices, systems and employees or human capital costs such as calculating the costs of benefits and compensation programs. Engaging experts in human capital early in the process will enable you to evaluate the costs involved and incorporate them into your negotiations on price.