3 Tips for a Successful M&A Deal

3 Tips for a Successful M&A Deal

Mouna Sarih 06/08/2017 3

There are many reasons why top executives and business owners decide to acquire or merge with other companies. Some mergers are a way to kill competition by buying up rival companies. Other reasons may include the ability to easily gain new customers, boost business productivity, seamlessly penetrate a new market and even save a business from going under. Whatever the reasons for a merger or acquisition, the entire process starts and ends with strategy.


1. Put Together a Coherent Team



If you are thinking of a merger, get to know your potential partners. You want and need to know the person and their company from the inside out. Don't jump into things without fully vetting the individuals. Do background checks. Require references and talk to all of the references. Talk to the prospective partner’s employees. The attitude of the employees will provide a much clearer picture of the company and the individual as a leader.

If you’re planning to merge two separate entities, this means there will definitely be compatibility and integration issues, no matter how hard you've worked to reduce the risk of that happening. Every transition requires the presence of strong leadership, whose members will be chosen to define the tone and set a precedent for the direction and efficiency of the new entity. The transition team leaders must be chosen from both sides of the deal. These people will already understand the workings and culture of their respective companies and understand their employees on a personal level; and those advantages trump the hiring of new executives.

In addition, these leaders will be able to set expectations and develop a well-defined transition and work plan while maintaining flexibility and adaptability as conditions continue to evolve. Almost every company has these three divisions: finance, sales and marketing and operations. So, it makes sense to pull together a pool of experts that represent these areas of expertise. Depending on your unique situation, you may need to bring in external help in the form of legal counsel, valuation experts, investment bankers and accountants. 


2. Thoroughly Assess Liquidity & Financial Capability 



It is extremely important that the people who make up this team be able to work together; this is neither the place nor the time for maverick thinking. Everyone's eyes must be on the same objective, and these experts must think cohesively and communicate constantly. They must also be willing to carry out their respective responsibilities within the limits of their authority as defined by the CEO or someone appointed by that person. While an M&A is not simply a financial transaction, you will be remiss to misinterpret the importance of financial stability while executing such a deal. If the recession taught businesses one thing, it is the importance of liquidity above profit-and-loss statements.

Before embarking on a M&A, ascertain that your company has enough liquidity to make and sustain such an investment. Also, keep an eye on your capital structure; you want to be sure that it can handle the added strain and responsibility. If each of these questions can't be answered in the affirmative, it may be a bad idea to go forward with your plan. Reason? Unless you can handle a sufficient amount of debt and access equity-capital funding strategies to provide you with the perfect balance sheet, you will need to hold off on that M&A.

Talk to the prospective partner’s customers or current clients, as well as those that have left, and find out why. Read customer reviews and learn as much as you can about the future viability of the company based on what people say. Customers can tell a lot about the company. Their happiness, or displeasure, is a sure sign of how the company and its leadership perform.


3. Establish Clear Goals & Share Information Efficiently 



You have to be willing to look at everything from culture fit, geographic location and product to the market, the industry and business perspectives. No one deliberately plans to enter a bad deal, but unfortunately, it does happen. History shows that after the party is over, and the hard work begins, things rarely turn out as anticipated. Each successful M&A starts good, has a transition period with issues and uncertainty, and in the end, results in a better company. It is always the “transition” period that is the most challenging, resulting in the greatest cost on multiple levels.

In today’s world, you’ll hardly hear of a company (buyer) sending over a team to the physical location of another company (the seller) to look at its books. We live in a digital world today that has eliminated the need for that hassle. However, this digitisation brings its own hazards, especially in the form of security issues. For this reason, consider using a virtual room to help both parties look at each other’s business documents securely and efficiently. Virtual data rooms act as a neutral and secure off-site location where members of both teams can be free to share documents and collaborate effectively. Virtual data rooms help expedite the M&A transaction process, not to mention that they significantly cut down costs such as transportation (if you were to fly in your executive team to physical data-room locations).

Start by asking yourself some pertinent questions. Is your objective to boost your market share? Are you seeking to bring in new products, services and intellectual property under your corporate wing? Are you trying to break into new and contiguous markets?  Are you trying to eliminate a competitor or to achieve vertical integration? This introspection will definitely help you set goals for your business, and make decisions in the right direction, to keep you from veering off track. 


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  • Brian Westwood

    Interesting read :)

  • Hira Ahmad

    Having enough liquidity is crucial for the survival of a merged company.

  • Anas Bouargane

    Great article !



Mouna Sarih

Finance Guru

Mouna is a promising M&A banker, currently working at BNP Paribas in Paris during her gap year and previously interned at JP Morgan. She is well-versed in negotiations, planning and development, relationship management and financial analysis. She is currently reading a master’s degree in financial economics at the EDHEC Business School.


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