Pursuing a merger or an acquisition is one of the most effective ways your company can grow quickly. You may even be able to add considerable revenue, literally overnight, by ‘taking over’ another business. Attaining organic growth in the traditional sense by increasing sales of existing products or services can take years.
A merger or acquisition could also see your company grow into new geographic areas and new customer segments more quickly and easily. You can do this via a horizontal acquisition or a vertical acquisition.
Even though there are a lot of benefits to acquiring another business, there are some possible downsides to consider as well. For example, completing a merger or acquisition can be financially costly as well as time-consuming.
As a result, an M&A should be thought about carefully taking into account how much the transaction will cost and how it will be financed, before beginning the process.
Other potential factors to consider include the structure of the deal, some degree of control may have to be shared with the owners of the business you’re acquiring, especially if the owners aren’t retiring but intend to be actively involved with the newly merged entity.
It’s also critical to ensure that the cultures of the two merging businesses will be compatible. Mismatched corporate cultures have been the main cause of numerous failed mergers, including some high-profile mega-mergers.
For example, if one company has a more formal and buttoned-down style while the other is more casual and laid back, conflicts will be more likely to arise. Try to get a feel for the knowledge, skills and experience possessed by the company’s Directors, employees and key managers.
For help and advice with preparing for a merger or acquisition, please get in touch with our expert team at Palmers Solicitors.