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Every every day, there are stories in the financial media of merger and acquisition agreements in SMEs and major corporations. While increasing revenue and gaining exposure to new customers are often key motivations for a merger, it is imperative that any business wishing to enter the M&A game has a well thought out strategy for ensuring success of a deal.
A successful M&A is a complicated process and the final outcome depends on many variables that must be considered by both parties. A top-quality management team is crucial to ensuring that your business is able to effectively navigate the M&A process. A trusted external consultant and accountants who can aid in this process can also enhance the overall credibility of your M&A strategy.
The first step is to perform an in-depth review of the financial health of your company. This involves analyzing the profit and loss statements as well as cash flow, analyzing equity and debt of the company, and determining if you have enough cash flow to pursue an M&A transaction. The financial health check will also reveal any discrepancies between your Management Accounts and Statutory filed accounts, which can create confusion for a buyer.
The cost of integrating both companies is another important factor. It could be a matter of physical costs like merging offices, systems, and employees. Or it could be in terms of human capital expenses, for instance calculating the costs of benefit and compensation programs. By involving experts in human capital early in the process, you will be able to effectively assess these costs and incorporate them into the price negotiations for your purchase.