Starting a business can be challenging for most entrepreneurs. Keeping it alive in the long term is even more challenging. You need to make smart decisions to help your business survive the constant market changes and competition.
While most industries focus on building an effective business plan, sometimes surviving on your own won’t be enough. This is where a merger and acquisition come into play.
What is a Merger and Acquisition?
A merger and acquisition (M&A) covers the consolidation of a company through a financial transaction with another organization. This transaction usually involves absorbing part or all of a company’s major assets and other properties to make a new brand, or taking over the old business entirely to get ahead of competitors.
There are different transactions under an M&A:
Under a merger, the boards of directors for both companies approve the agreement and seek shareholders’ approval.
In an acquisition, the acquiring company buys the majority stake in the acquired firm. The latter is allowed to retain its name or organizational structure.
This transaction involves two companies combining their businesses and restarting their corporate structures to create a new company.
- Tender Offers
A tender offer involves one company purchasing the outstanding stock of another firm at a specific price.
- Acquisition of Assets
Under an acquisition of assets, the acquiring firm buys the acquired firm’s assets with its shareholders’ approval.
- Management Acquisitions
This transaction involves a company’s executives buying a controlling stake in another company.
When Should Your Business Consider an M&A?
Your business can greatly benefit from the M&A in the long term. However, because there are also many risks involved with making these decisions, it’s important to know the right time to try it out.
Generally, it’s a good idea to enter a merger and acquisition deal if you’re looking to do the following:
● Grow and expand your company
Most companies aim to expand their operation after a few short years but fail because of several limitations. With an M&A, your business can partner with a company with a loyal customer base and finally focus on expansion.
An M&A can also increase your income and market share, boosting brand awareness, customer loyalty, and sales.
● Overtake your competition
The business world can be fast and unforgiving. If you don’t keep up with the right partners, you lose to your competitors and watch your business fail. As such, an M&A can flawlessly streamline your operations and help you eliminate competition more quickly.
However, this step is about more than just the amount of funding you have. You’ll also need to cultivate your employees and build a similar workplace culture identical to your old one.
● Keep up with the industry
Not all businesses will have the resources to outgun their competitors with all the latest industry innovations. To ensure that you can keep up with these changes, you can consider starting an M&A with a company already adopting these approaches.
4 Essential Facts All Startups Should Know About Mergers And Acquisitions
Getting into an M&S is a major decision you must consider and prepare for. This is especially the case if you hold the role of a global PEO. While your advisors will generally give you a good idea of what you can expect, here are a few things you should note.
1. All deals are negotiable
Buyers may sometimes offer you a deal equal to or lower your expected price. While this may be their initial standpoint, remember that all deals are only final once both parties agree on the conditions. You can also decide on the real value of your company by presenting supporting documents and evidence.
2. The time frame can be lengthy
Because an M&A needs careful thought and planning, negotiations often take a while to process. The average waiting period for an M&A is four to six months. However, some can also speed up the process if the situation is urgent.
3. You can get the best deals with multiple bidders
If you want to find a way to get the best offer for your sale, you can leverage the situation and sell it to the highest bidder. Buyers will most likely get competitive with one another, allowing you to put a higher price tag and better deal terms.
4. Financial statements will be reviewed
Before anyone buys out your company, they will most likely want to see a representation of your financial standing. This proof will help the buyer understand your financial history, previous statements, and other related information that may affect their reputation and current situation in the market.
Tips and Tricks You Should Consider to Boost Your Success Rate
Many companies have utilized M&A strategies over the decades to help them grow and evolve. However, considering the high-level risks you’ll face, it pays to weigh your options to ensure your plan doesn’t fall out. Here are some tips and tricks to reap all the benefits of a successful M&A.
● Know the right target acquisitions
If you have specific criteria, look for target acquisitions to help you attain your goals. To expand and grow your company, you will need to partner with a company that can help you penetrate the competition and spread brand awareness.
● Decide on an integration process
There are different methods and strategies for merging two companies into one. However, to do an M&A successfully, you’ll need to unify your steps and have a joint system that works for both.
● Plan out your appeal
Negotiating M&As must appeal to the board of directors. If you don’t find a way to convince them that the plan can be successful, chances are they won’t be as enthusiastic about the idea as you are.
● Look into suitable best practices
To better ensure the chances of success on your agreement, you must understand how you and another company will merge. If you have conflicting values or approaches, you should look into best practices that can apply across all your networks.
Build Your Startup for Big Things
Companies survive solely by doing whatever they can to stay ahead of the curb. With more startups entering the market, it is important to realize the value of a strong business strategy. As part of this movement, more industries are taking advantage of M&A strategies over the last few years.
While it can be a promising approach to take up, remember that all approaches come with their own risks. Before making a deal with another company, consider your options carefully and plan out your route.
About the author
James Peters is a dynamic leader in the world of HR and Global Mobility. After a long career in helping businesses develop global programs and corporate expansion plans, he is now the president of Global Expansion — a company helping startups and Fortune 500 companies in need of complete and streamlined Employer of Record (EoR) solutions. In addition, James shares his expertise through business mentorship and writing.