In the financial press, articles about mergers and acquisitions between SMEs and large corporations are published each day. While boosting revenue or gaining exposure to a brand new client base are often the primary motivations for businesses to enter into M&A, it is important to have a well-thought-out strategy to ensure that they succeed.
A successful M&A is a complicated process and the final outcome is dependent upon many factors that need to be considered by both parties. A high-quality management group is essential to ensure that your company is able to successfully navigate the M&A process. External consultants and accountants can enhance the credibility of your M&A strategy if you enlist their help.
The first step is to perform an in-depth financial health assessment of your company. This involves analyzing profits and losses statements and evaluating cash flow by analyzing debt/equity proportions, and determining if you have the funds to pursue an M&A deal. The financial health check will identify any discrepancies between your Management Accounts and Statutory Filed Accounts, which can cause confusion for a buyer.
Another important factor is to take into consideration the costs of integrating both businesses. It could be a matter of physical costs, such as merging offices, systems, and employees. Or it could be a matter of human capital costs, like taking into account the cost of compensation and benefit programs. By involving human capital experts early in the process, you can effectively assess these costs and include them in your purchase price negotiations.