In general, mergers and acquisitions (M&A) describe the consolidation of companies. To clarify, a merger is where two companies merge together to form one new company while an acquisition is when one company takes over, or acquires, another. Although the two terms are usually referred to together, this distinction is important as each term describes a different process. The M&A process is complicated, and not all mergers or acquisitions are a success. Below we discuss some of the elements that are necessary to successfully complete the M&A process.
- Common Vision and Growth Strategy
The successful M&A will develop a shared and clear vision of what the new company will stand for and how it will operate. Not only is it important to have a shared goal of what you want the company to be, but there has to be a strategy implemented for growth. Merely merging or buying out a company and expecting it to operate as before is impossible. Instead, a successful growth plan will involve such things as expanding business to neighboring markets and taking advantages of opportunities where there is already an overlap between the two companies. The strategy will also be clear on things such as the size and timing of deals it will seek and how often it will seek them.
- Selection of a Strong Leadership Team
A well-prepared and available M&A team is essential to the overseeing of a successful merger or acquisition. Not only do you need to have members who can devote significant time to the process, but they also should have extensive knowledge of the unique needs of each company involved. It may involve pulling members from the corporate board or other leadership roles from either company. Regardless of who is chosen, ensuring that they are given sufficient resources, including in the form of time or compensation, is vital to their success as leaders of the M&A process.
- Clear governance plan for all stages of the M&A process
Now that you have selected a strong M&A team to lead the process, it is crucial that each member of the team knows exactly their purpose and what they are in charge of. There should be no question as to who will decide what and where they can turn to figure out the information they need in order to make sound business decisions with accuracy and speed. The team will have someone delegated to compliance with the statutes relating to the M&A process in general, as well as team members whose primary responsibility is developing new investment strategies or creating a new investment plan for its members.
- Due Diligence
Though it may seem obvious, a successful merger or acquisition relies on the quality of due diligence. Without it, you expose yourself to the possibility of unwanted surprises and even liability just because you missed something in the M&A process. Therefore, doing your due diligence prior to and during can mean the difference between failure and success. The process can be daunting and requires thought before proceeding. Make a plan and identify risks that may have an impact on the business and share your findings transparently with your M&A team. This likely requires expending substantial resources but doing so will prevent expensive and even potentially disastrous problems later on.
- A Solid Communication Strategy
Once the deal is done, the process has really only just begun. A good communication plan cannot be undervalued. For instance, what will happen to all of your current and future shareholders? Who do they turn to now to find out what’s going on and what’s happening to the value of their investment? How are you communicating to your shareholders and employees who the new leadership team will be? All of these things are important and it’s necessary to create a solid communication package to determine not only what information to disclose, but when the appropriate times are to roll it out so that all members of the prior companies and the new one will be informed and at ease with the decision.
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With over 40 years experience of taking legal burdens off of business owners, The Law Office of Jack Sturgill is uniquely prepared to help you make the right decisions for you and your company. To learn more about mergers and acquisitions and what it could mean for your business, contact us at 410-296-6485.