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Surviving the Complicated
M&A Process
Businesses are bought, sold, and
merged each day for myriad reasons. And while the
reasons may be basic or complex, most Merger &
Acquisition processes can be very complicated and time
consuming, even when the transaction itself appears very
attractive.
M&As typically provide small to
mid-sized businesses opportunities to capitalize on
their potential. However, failure to adequately plan
for the long term business integration has caused upward
of 70% of Merger & Acquisitions to fail. A recent
survey from KPMG LLP estimated that only 17% of M&As
succeeded in creating shareholder value. This means
that responsible business people must think this process
all the way through before jumping at a Merger &
Acquisition opportunity
What exactly needs to be planned
out so carefully? First of all, business owners need to
understand that this process is stressful and
time-consuming, not only for them, but for their
employees, as well. The transition of strategy, the
players, and their roles is difficult for all involved.
For this reason, the clear and successful integration of
new work, new employees, new leadership, and new
objectives must be planned in advance of the deal’s
completion.
The Seller should review the health
of the business before selling, in order to maximize its
value. Research should be conducted, to identify what
makes the organization attractive to prospective
Buyers. Understand the objectives of competitors, and
make the business more interesting to them. Buyers need
to see company value, so how does a Seller maximize
that? If they are seeking improved location, and your
business sits on valuable real estate, this increases
overall value. If they are seeking to increase market
share in a specific demographic that your business
serves, this will entice buyers. If they are looking
for products/services to sustain business well into the
future, and your business has a track record of
innovative product development, this will pique the
buyers’ interest.
There should also be a transition
plan for human capital, as well. Know what the selling
owner’s role will be, if any, after the deal is done.
The same applies to Senior Management and rank and file
employees. There needs to be a tangible plan for the
people affected by this deal, if it is to have a
successful outcome. Consolidating operations of
companies with different cultures can be difficult, time
consuming, and a drain on resources and energy, so this
is not something that can be worked out on the fly.
Many Senior Managers leave the
company within a year of a merger, which oftentimes
leaves the new business lacking in much-needed
leadership. Because they are trusted with the running
of day-to-day operations of the company, senior
management is often also charged with directing the
integration process, which can leave their regular
duties under-attended. The stress of juggling such
responsibilities can be overwhelming, which is one
reason why these managers leave.
It is imperative for merging
companies to develop a sound strategic vision and action
plan, and to communicate these to employees. Sticking
to this vision and plan will make it easier for the
company get through its growing pains. Solid
integration plans are needed to ensure that the merger
reaps benefits, and that customers and employees alike
remain grounded throughout the many changes that will
occur. The Buyer should be sure to configure this plan
before the merger is completed.
Your chances at surviving this
complicated process and realizing maximum value for your
business are greatly enhanced by proceeding with clear
direction and objectives, as well as realistic
evaluations of your business’ worth and prospective
buyers or partners. You can smooth out the bumpy road
of transition by identifying key employees and creating
a plan to keep them in the company, developing clear
priorities for all employees during and after the
transition, and creating a vision, strategic direction,
a corporate culture, and clear integration plan.
-- Jeffery Ross © 2005 RossFialkow Capital Partners LLP
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