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Every every day, there are stories in the financial press of merger and acquisition deals that are being made in SMEs and major corporations. While increasing revenue and exposure to new customers are typically the primary reasons for a deal, it is vital that any business looking to enter the M&A game has a well-thought out strategy to ensure the success in a deal.
A successful M&A is a complex process, and the final result is influenced by a myriad of factors that both parties must take into consideration. A top-quality management team is crucial to ensuring that your business can successfully navigate through the M&A process. External consultants and accountants can boost the credibility of your M&A strategy if you ask their help.
The first step is to conduct an in-depth check on the financial health of your business. This involves analyzing the financial statements for profit and loss and cash flow analysis, analyzing debt/equity ratios, and determining if you have the financial resources to pursue an M&A deal. The financial health check will reveal any discrepancies between your Management Accounts and Statutory Filed Accounts that could cause confusion for a buyer.
The cost of integrating both companies is an additional factor. It could be physical expenses such as merging offices, systems, and employees or human capital costs such as calculating the cost of compensation and benefits programs. By involving human capital experts early in the process, you can be able to accurately evaluate these costs and include them in the price negotiations for your purchase.
