5 Keys to Successful M&A
A merger or acquisition can be a stressful undertaking that leaves your head spinning. No matter the reason for the merger, the right strategy is key. The following tips can help you maintain your focus as you navigate the process.
Assemble the Perfect Team
You need a pool of experts that includes someone who can speak to every department in your company. For most businesses, that will include at least experts in sales, operations, and finance. You’ll also need external legal support, as well as the guidance of valuation experts, accountants, and investment bankers. Your team must be able to work well together. You must share the same objective, and be able to think strategically while avoiding a battle of the egos.
Evaluate Financial Capacity and Liquidity
M&A is more than a financial transaction; underestimating the role of financial stability can prove fatal to the deal. Liquidity is more important than profit and loss statements. Ensure your company has sufficient liquidity to make and fund a major investment.
Pay careful attention to your capital structure to ensure it can manage the responsibility and strain of M&A. If you can’t affirmatively answer questions about your financial capacity or liquidity, it’s time to reassess your plans.
Set Clear Goals and Measures of Success
What is your objective? Do you want to boost market share, bring in new products, or break into a new market? Is the goal to edge out a competitor? This thoughtful approach can help you set clear goals and make good decisions while avoiding needless distractions.
Set Good Policies for Information Sharing
While historically commonplace for a company to send a team to another company to review its books, today’s digital world largely eliminates that hassle. But digitization carries its own hazards, particularly when it comes to confidentiality and security.
It’s helpful to use a virtual data room to help the parties securely and efficiently review one another’s documents. Virtual data rooms provide a secure, neutral off-site location where teams can freely share documents and collaborate. These data rooms can expedite M&A transactions, reduce transportation costs, and make the entire undertaking more convenient.
Recruit the Best Possible Leadership Team
When you merge two entities, there are integration and compatibility issues no matter how hard you attempt to reduce issues. Each transaction demands strong leadership who can set the right tone and ensure the efficient creation of a new entity. Consider whether the executive is a clear and quick thinker. Weigh also their people skills, since excellent communication and a willingness to engage in teamwork are key prerequisites to success.
It’s important to recruit team leaders from both sides of the deal. These people already understand the cultures of their respective organizations, as well as their staff needs. These advantages greatly outweigh any potential advantages to bringing on a new team.
Your leadership team can set expectations and design and implement a transition plan. So give them time to do this, and ensure you’ve chosen the right people for this important undertaking.
About Madison Street Capital
Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner. Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.