The COVID-19 pandemic has separated strong companies with good foundations from those that lacked the basic structures needed to survive. As economic prospects are trending upward, stronger organizations are considering acquiring competitors to make themselves even more robust for the future. A company merger is more than just a financial transaction. It involves hard work that requires you to think about everything from technologies being used to customers being serviced to the culture of the company you are acquiring. The following are a few tips on how to merge companies successfully.
Examine Your Financial Health and Liquidity
You need to look beyond profit and loss statements and focus on liquidity. Does your organization have sufficient liquidity to sustain investing in a company merger?
You will need the liquidity to carry out the transaction in a successful way. There should be sufficient liquidity to sustain your investment and allow your capital structure to maintain its strength under the added strain of the merger.
If an honest assessment reveals that you lack the needed liquidity, it doesn’t mean that acquiring your competitor is not possible. You will need to investigate debt and equity capital funding options to give you what you need to be successful with mergers and acquisitions.
Carefully Evaluate the Transaction
A merger that seems reasonable on the surface may be fraught with unperceived difficulties. It would help if you had a team of experts in place to evaluate the transaction before committing your resources.
Your team must be able to foresee unforeseen challenges and create solutions. These include financial and organizational challenges connected to creating a new company that works smoothly.
If your organization lacks experience in this field, you may want to temporarily bring in a specialized executive leadership team that can walk you through the process. It is one thing to predict benefits or profits from a merger and another thing to ensure that the anticipated benefits become a realized fact.
Understand What Success Looks Like for You
Your definition of a successful merger may be different than that of another organization. To identify what success means for your organization, you need to know what you want your business to look like and what you value the most in your business going forward.
You should know what you want to get from the merger. This requires answering a series of questions, such as:
- How will this merger affect your market share?
- Will the merger provide you with new processes, products, or intellectual property?
- Is the goal to eliminate a competitor or expand a product line?
- Are you looking to expand economies of scale, allowing you to be the low-cost company in your market?
Achieving these goals during the merger should be your singular focus. Your process and team should align with your goals. The merger should serve as a way for you to take your company from where it is and propel it to where you want it to be.
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Investigate The Company Merger Thoroughly
A successful merger is more than a simple math problem or the result of a simple audit. Due diligence evaluates the strategic fit of an acquisition.
At this point, you have considered your goals and the drivers of the valuation. Now, you need to use thorough investigation to ensure that the value you hope to get from the merger is there. This investigation includes looking at the company you are acquiring from a legal, financial, personnel, and operational standpoint.
Pay close attention to the target customers of the company you are acquiring. Understand what they are doing to maintain relationships with their customers to continue to maintain those relationships once you acquire the business.
How to Merge Companies Successfully
Successful mergers are those that fulfill your goals and objectives. They will require you to invest money in the right personnel, communicate with all parties involved, show empathy when needed, and have the business sense to know when it is time to say goodbye to unneeded personnel.
Fusion CPA has helped many of our clients through successful mergers by providing personalized business advisory services. We live and breathe entrepreneurship and make the merger process easier by helping you with tax planning, accounting, and software integration. Push the button below to make a discovery call today and find out more, or read more about how you can merge your accounting firm with us.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.
