Merging your business with another or acquiring a smaller company can be an effective way to grow your business. However, mergers and acquisitions (M&A) can also be complex, risky, and fraught with complications. You can ensure a successful transaction by following these six steps when considering a merger or acquisition as either a buyer or a seller.
1. Define your Goals
Everything you do should be done with a clearly defined goal in mind. If you do not know where you are going, you will never be able to get there, no matter how hard you work. For this reason it is essential to begin the M&A process knowing exactly what you would like to achieve. These goals should not be vague—it is not enough to know, for example, that you want to expand your business and get rich. You need to create measurable and achievable goals, realistically determined by a detailed analysis of your unique logistical challenges and financial situation.
2. Bring in Experts
However, it can be a difficult and overwhelming task to create these goals and move towards achieving them, especially for someone who does not have any experience with the M&A process. In order to make everything go a bit more smoothly, businesses looking to get involved in an M&A transaction should seek out and retain an experienced business attorney to serve as their counsel throughout the process. Not only will counsel be crucial in determining what you should be aiming for, but they will also aid you both in creating a road-map detailing how these goals can be achieved and in helping you execute your plan for success. Your legal counsel also be able to work with alongside your CPA or any of your other trusted advisors—and, if you’re missing one of these key parties, your legal counsel can provide a recommendation.
3. Make and Follow a Plan
A plan for success is more than just a set of goals. After deciding what you would like to get out of the M&A process, you need to find out how to get what you want. M&A transactions can often be overwhelming, but you can make sure the process goes smoothly by starting early and not letting any of the many steps catch you off guard. This is where your counsel can really come in handy—by making you aware of and helping you prepare for the challenges of finding, contacting, and negotiating with potential targets, drafting legal documents, and ensuring that the entire transaction is legally valid, your counsel will give you and your business the time and resources necessary to deal with the operational challenges that inevitably emerge as part of the M&A process.
4. Do Your Due Diligence
After you have found what seems like the perfect candidate and received what seems like the perfect offer, you may feel like your work is done. You are exhausted after a long and winding series of communications, meetings, negotiations, and contracts working towards a perfect deal, and you have finally found it. Unfortunately, this is not the end. Before drafting a final purchase agreement and closing the deal, you need to make sure that everything that you think you know about the other party is true. This involves a lot more than taking their word for it—a comprehensive due diligence process needs to include independent checks of financial records, projections, and analyses of just about any aspect of the business that could affect the eventual success or failure of the transaction.
5. Negotiate Carefully
Once due diligence has been completed and you are completely convinced that you have found the right target for the transaction, it is time to finish the deal. Here is another spot where having experienced counsel is essential—not only will your attorney be able to draft a final agreement, but they will also be able to negotiate on your behalf with the knowledge and experience necessary to ensure that the agreement meets your needs. This is not the time to give in, so it is vitally important that your interests are strongly protected during negotiations. Failure to do so can result in a “successfully” closed merger or acquisition that will leave you wishing that it had never closed at all. To that end, it is never too late to back out if your contract still has not been signed: if the final agreement will not allow you to achieve your goals and the other party is stubborn and unwilling to negotiate, your counsel may recommend that you restart the process and search for another candidate.
6. Follow Through
Once both parties have settled on a final agreement and signed all the papers, the transaction is complete. However, there is still work left to be done. Both sides may have to do post-closing adjustments and other preparations to finalize the process, but for the buyer in particular the work has only just begun. Now the long process of successfully integrating the acquired company begins in earnest. Again, the advice and guidance of your counsel will be helpful here—a major part of ensuring a successful merger or acquisition has been completed, but there is still work to be done and decisions to be made in order to ensure that your goals are fully achieved.
We Can Help
At Bailey Law Firm, we have the skills and knowledge necessary to help you make sure your company’s merger or acquisition has a successful outcome. If you would like to meet with our attorneys to discuss any aspect of an upcoming or in progress merger or acquisition, please contact us with any questions by clicking here or by calling our office at 832.510.2900 to schedule a complimentary consultation.
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