When small businesses start to grow, it is time to plan for expansion and bring in new products to gain more success. One of the strategies includes merging with another company that is equal in power to yours so that you can become one legal entity. The acquisition is another way to grow your business to acquire or be acquired by another company.
For your mergers and acquisitions plans to run successfully, here are some helpful tips:
Evaluate Your Firm’s Financial Circumstances
You need to access the condition of your liquidity state to find out whether the firm can undergo a successful transaction. After getting a positive value, you can find out if your capital structure is enough to sustain the implications of the expansion.
If this situation does not work out in your favor, you can find a suitable funding solution to position your firm better for the transaction.
Choose the Right Partner for Transaction
First, make sure that you have an outline of your goal and objectives so that they align with your target. You will want to find the right firm to merge with, whose objectives and plans are not too different from yours.
Settle for the firm that you think has a similar vision regarding the combined organization and future plans.
Receive Professional Advice
When it comes to mergers & acquisitions, it is best to seek professional services to make your plans successful. They can provide you with advice and help your firm prepare for the transaction.
Other than a business advisor, involve a lawyer to ensure everything falls under the laws and obligations. Discuss with your bank and relationship manager about your transaction.
Paying Method of Acquisition
After finalizing the other firm and discussing your goals, look for ways to pay up for the acquisition. Besides cash, you can go for other options like products, stocks, seller-held financing, etc.
Make sure that your form of payment should be informed by your company’s credit health, flow status, and intellectual property rights and copyrights.
Allocate the Power
When you merge your firm with another company, discuss all the terms, including who will be in charge of the final decisions. Each of the owners should be aware and notified of their position in the merger relationship.
Since the legal entity becomes one, the firm’s name should also be decided by mutual discussion. It can be a new name or a combination of both.
Agree on Non-compete Agreement
It is best to go for a merger firm that does not target the same marketplace. Make sure to include it in terms of your contract as it can lead to a successful transaction.
This step ensures the success of both the firms among their own competition. To benefit the new business entity, sign a legally binding contract with the non-compete agreement.
How Will M&A Impact Your Firm?
It is essential to keep your important and trusted staff members in your new merged firm. Even though you are entering a new business entity, not all information should be communicated as some details should remain confidential.
Reassure your employees that the merger will not impact their salaries and lives. Give them an insight into how the future changes will be implemented. Some common questions to consider include:
- How will you fill the new vacancies for employees?
- How will the knowledge and process be conveyed?
- What are the staff retention policies?
- If their salaries will be affected or not?
- How can you take care of any cultural problems?
- What new tasks and jobs will be assigned to the employees?
