For many reasons, business owners and boards arrange to join or to be bought or sold as a strategic move for mutual benefit to both businesses. Careful planning cannot be overstated as a vital first part of the process. Naturally, the best-laid plans often produce unintended circumstances. Reaching out to counsel experienced in mergers and acquisitions at the very start is key to learning many details for a successful transition. As you consider your business’s next steps toward a merger, take time to learn more before you dive into growing your business through an acquisition or a merger. Here are five areas to focus on at the start.
Stretch Out Your Hand to Become Acquainted
- When you first get the idea of considering a merger or acquisition, get to know all you can about your possible future partner. Take time to interview the owner and the company leadership. Find out what their culture is and how they operate. Do they follow their own policies? Do they even have policies? Dig into their history and conduct background checks. Spend time with the employees from the receptionist to the heavy lifters. What you will learn may hasten your decisions or put an end to them.
- Gain access to the new company’s customers or referral partners. Learn their turnover rate and find out how well they deliver their product or service to their customers. Read reviews. Engage in forums such as social media that may reveal underlying problems that are hushed in the workplace. Address any situations that arise boldly and fearlessly. Overcoming problems that have built over time often are not possible or are expensive prospects for any business.
Take Their Financial Temperature
- Dig into local, state, and federal tax history. Learn if the company has been compliant or if there are arrears or late payments. If any outstanding issues remain, demand resolution.
- Hire a financial bookkeeper or accountant, or use your own to order up a thorough review of the company’s books. Comb over any unexpected issues and if the books are riddled with instances that don’t add up, you may choose to rethink your merger. The partner company’s systemic problems with finances will only grow to become YOUR systemic financial problems.
Discover What Happens Behind the Velvet Rope
- Fully explore the partner company’s operations. Do they have a written policy and procedure manual? Are there human resource policies in place? Do employees have a good understanding of company policy or are they totally in the dark? Do the employees welcome growth or are they entrenched in their way of doing things? Is there a solid hierarchy of decision making? Is leadership in place and operating or have they been asleep at the wheel?
Change can be difficult for individuals and for organizations. Yet, when it makes sense to join forces with another company to become stronger, to add growth opportunities, or for any reason, the new company can find success when the process is respected. A myriad of potential problems is still possible even with careful planning.
Here are some common reasons for merger or acquisition failure:
- One or both of the business owners have flawed objectives. When the reasons to join are for glory or to make a quick buck or some other self-serving reason, the business deal is likely to fall apart.
- Communication is hindered or poorly executed. Weaving together two cultures and two different groups who think and behave differently is hard enough but when one or both side fails to communicate, deals can go south fast.
- Unexpected activity on the business landscape. Despite research and digging, the competition can make a big move you were not expecting that can cause a business to tank unexpectedly.
The first To-Do on your list as you explore a merger or an acquisition is to obtain expert advice from an experienced attorney. Levoritz Law understands the space of business mergers and acquisitions and can help you to be prepared through planning and insight. What’s more is we can help you avoid pitfalls in your current company, and in the newly joined company. Call us today to schedule your consultation.