A merger or acquisition can position your business for long-term success. It might give you broader reach in the market, allow you to secure more efficient and cost-effective supply chains, and secure access to broader research and new talent.
That said, mergers and acquisitions are oftentimes complicated. And if you don’t pay close attention to the nuances involved in the process, then you might set yourself up for a bad business deal that has long-term negative implications for you, your investors and your shareholders.
What you need to be aware of as you consider a merger or acquisition
There’s a lot that goes into the merger and acquisition processes. If you want to ensure that you protect your business interests as fully as possible, then you need to diligently analyze your circumstances and what you can do to mitigate risks. Here are some steps that you can take:
- Assess liabilities: Given that outstanding debts can negatively impact your business’s cashflow, you need to understand what liabilities you’ll be taking on through a merger or acquisition. These liabilities might include outstanding loans and accounts that are due, but they can also include tax obligations..
- Costs related to talent: When you merge with or acquire a new business, you’ll be taking on new personnel. Although this means that you’ll need to take their salaries into account when looking at your business’s financial picture, you’ll also need to consider other costs associated with those employees, including their benefits, training and retirement packages.
- Outstanding accounts receivable: Before you take the plunge on a merger or acquisition, you should have a clear picture of what outstanding accounts exist. If you can accelerate the collection of those accounts, then you can maximize your cashflow, which can ease the transition once the merger or acquisition is complete.
- Assess equipment: Although merging with or acquiring a business might seem like it’ll give you a leg up because you’ll have access to more equipment, it can actually be a more costly move than you expect. This is because some of that equipment may be leased or subject to a loan.
- Consider culture: If you want your merger or acquisition to work in the long-term, you’ll need to consider other aspects outside of the financials. This includes the culture of each business and how they’ll mesh. If values don’t align, then you might be in for a tough road ahead.
- Think through your alternatives: Even if a merger or acquisition seems like the best path forward for your business, you need thoroughly think through your other options. That way you’ll know if a merger or acquisition is truly your best option.
Are you ready to move forward with your merger or acquisition?
There’s a lot on the line when you make a major business move like pursuing a merger or acquisition. That’s why you need to take the time to ensure that you’re doing everything you can to protect your interests.
While this means educating yourself about the process and exercising due diligence in preparing your merger or acquisition plan, it might also mean finding the support that you need throughout the process.