Preparing your business for a merger or acquisition

Mergers and acquisitions (M&A) are often completed to gain market share, increase revenue, or expand business amongst many other things.

When you and another business decide to complete an M&A, it can be a stressful process to ensure everything is done correctly and a successful deal is achieved.

The most important part is ensuring that you and your teams are organised and are sensitive to both parties in the M&A process.

Organising finances

When operating your own business, it is important to understand your finances and have an effective accounting system in place.

However, when completing M&A, this is even more crucial to allow not only financial information to be relayed easily but can also give confidence to the other business about your financial health.

It is important to relay the type of accounting system or accountants you use to allow for an easier merging of the two systems so that there is better synergy.

In some cases, though, the processes of the acquiring firm will be implemented within the newly acquired firm to ensure consistency with existing practices and this can require a period of reorganisation and training.

Before the merger

When deciding on the M&A, it is vital to think about how the two companies will fuse together, both as businesses, but also down to the individual departments (and sometimes even employees depending on the size of the companies).

You also need to decide on the extent of the M&A – will it be a full acquisition (where one party takes full ownership), a partnership, or a joint venture? The answer will greatly impact how you plan to go forward with your business.

There is also a need for your own company to conduct thorough financial health checks before preparing to merge, as it is vital to demonstrate a strong financial position to the other companies involved in the M&A during the financial due diligence process.

Teamwork and communication

For an M&A to be successful, you need to ensure that you have a team around you who are prepared and understand their part in the process.

A variety of departments from both companies will be involved here, with Human Resources (HR) being a key one due to the potential need for redundancies or role changes.

Something which cannot be stressed enough within the teams is communication.

Failing to confer among people in a stressful situation can create unnecessary tension and frustration.

This is especially unwanted when dealing with more complex issues such as redundancies and department shifts.

Second exits

If the owner of the other company decides to stay within the business after the partnership is formed, then it is important to include second exit terms when going through the M&A process in the first place.

This means that should the other owner decide to leave the business completely later on, then there is the opportunity for them to sell their share of the business back to you.

If you need help with preparing your finances for a merger, our skilled team of accountants would be more than happy to help you.